ASIC has suspended the licence of Queensland-based Financial Technology Securities (FTS) after discovering the firm recommended inappropriate ‘double gearing’ strategies to clients.
Following surveillance of the firm, ASIC found that up until August 2012, FTS had a policy of recommending double gearing strategies to some clients regardless of their personal circumstances.
Double gearing involves a person borrowing against the equity in their home, and then using the money borrowed (the margin loan) to invest in the sharemarket.
The licence of FTS will be suspended for six weeks, effective 30 June 2014. The firm has ceased the practice of double gearing as a result of ASIC’s investigation.
ASIC deputy chairman Peter Kell said FTS’s one-size-fits-all, high-risk strategy regardless of personal circumstances was “completely at odds with providing appropriate financial advice”.
“Advice provided must always be focused on the client and their specific needs and circumstances,” said Mr Kell.
“Inappropriate advice undermines the confidence of consumers in the financial planning sector,” he added.
An ASIC statement said the regulator has put in place a comprehensive communication strategy for clients, representatives and related product providers of FTS.
The regulator conceded that double gearing “may be an appropriate strategy in many cases”.
“However, gearing increases risk, and ASIC considers advice that involves gearing, and certainly double gearing, as a complex type of advice. Advisers need to regard it as such in making enquiries of a client and ensuring suitability of the advice for clients,” the regulator said.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 25 May 2018‘Never been a better time’ for advice: MorningstarBy Killian Plastow
- 25 May 2018ASIC takes former AFSL director to courtBy Reporter
- 25 May 2018Henderson Maxwell owner launches investigationBy Aleks Vickovich
- 25 May 2018CBA issues update on AUSTRAC proceedingsBy Reporter
- 25 May 2018Employers granted unpaid super amnestyBy Jessica Yun
- 25 May 2018Bernardi backs bank withdrawal from wealthBy Aleks Vickovich
- view all