Convicted adviser speaks out, warns others
A former financial adviser, who was convicted in 2013 for providing inappropriate services, has finally shared his side of the story, saying he wants to warn others of how easily one’s reputation can be ruined.
Kevin Whitting was formerly an authorised representative of now-defunct Kedesco Pty Ltd and a salaried adviser at Shelbourne Financial Services on the Mornington Peninsula.
He was banned by ASIC for four years in May 2011.
In November 2013, Mr Whitting was convicted on five charges of providing inappropriate advice and five charges of providing false and misleading statements to clients.
He was 72 years old at the time.
Now, Mr Whitting has shared his story with ifa, offering some information he claims was not presented in court at the time of his conviction.
He hopes his untold account will offer a new perspective as well as act as a warning for other advisers.
Fund in trouble
According to Mr Whitting, there was no incentive for him to recommend clients invest in the Blue Diamond Deposits Trust, but he did so for more than 10 years.
“This was based on the fact that distributions were always paid on time and redemption requests were paid on an average of two weeks,” Mr Whitting said.
That was, however, until one day he noticed redemption requests were taking longer than usual to process.
“I immediately suspended any further investment into Blue Diamond and requested a personal meeting with the managers … I was told that the trust had received an unexpected volume of redemption requests and that the trust was experiencing a temporary cash flow problem,” Mr Whitting said.
“They told me that, in view of the cash flow problem, they had sold a trust asset and that the funds from the sale would arrive in the next few days and cash flow would be restored and all redemption requests would be met.
“Having had previous dealings with Blue Diamond management over a number of years, I saw no reason to doubt their word.”
Mr Whitting later received this explanation in writing (one of the pieces of information he claims was not presented in court).
With the fund’s promise at hand that it will “continue to meet redemptions”, Mr Whitting proceeded with the clients’ investments he had previously put on hold.
But it was not long – only three months, in fact – before Mr Whitting discovered the truth: the fund was on the cusp of collapsing.
“My mistake was to ever trust the Blue Diamond management.”
Mr Whitting was ultimately banned from the industry after five of his clients lost a collected total of $684,000 in the fall of Blue Diamond.
According to a 2011 ASIC press release, an investigation found that Mr Whitting had made “false and misleading statements” to clients by describing an investment in Blue Diamond as a fixed interest investment, when this was not the case.
He had also failed to determine the personal circumstances of his clients when giving advice, the statement said.
After pleading guilty, Victoria’s Frankston Magistrates' Court convicted Mr Whitting of all charges and fined him $5,000.
Mr Whitting today does not refute ASIC’s charges, but believes no consideration was given to his motives and the circumstances that led to his errors.
“They seemed to concentrate on the technicalities of my case and were focused purely on gaining a conviction to justify the resources they expended in pursuing me,” he said.
“My unblemished clean record of 30 years as a financial planner didn't seem to matter.”
But what Mr Whitting does regret is that his character statement was not presented in court, which includes an apparent quote from an ASIC representative stating that Mr Whitting had “tendered military service material and references, which satisfies me that he is a person of integrity”.
Mr Whitting said, “I willingly admit that I am not perfect and that I, like everyone else, can make mistakes.”
Life after banning
Mr Whitting describes these past events as having “deeply affected” him. He said he suffered reputational damage and has been unable to return to the industry even after the ban expired.
But what hurt the most, he said, was the harm to his clients.
“There are many sad stories of these unfortunate people that would break your heart. It certainly broke mine and not a day passes that I don’t think about them and how their lives were changed,” he said.
“My clients were not just clients, but were also my friends. My life has changed forever.”
Mr Whitting hopes his story can be a lesson for other advisers.
“Trust no one, get everything in writing and check answers for dishonesty, especially when dealing with fund managers,” he said.
“I have always led an honourable life. This is not the way I want to be remembered.”
Have you had similar experiences of injustice or enforcement activity? Speak to us on or off record [email protected]
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