ASIC: Commission model may have led to NSG FOFA breaches
ASIC has said it believes the commission-based model at NSG Services created a culture that might have led to breaches of the best interest duty.
ifa reported last year that ASIC took NSG Services Pty Ltd (formerly National Sterling Group Pty Ltd) to court for failing to take reasonable steps to ensure that its advisers complied with the best interests obligation when providing advice to clients.
Yesterday it was announced that the Federal Court ruled in ASIC’s favour.
The regulator believes NSG’s remuneration model had a role to play in the breaches, an ASIC spokesperson told ifa.
The spokesperson also confirmed some clients lost money as a result.
“The commission-based salary structures created an incentive for representatives to emphasise sales imperatives over compliance requirements and a culture in which the best interests and appropriate advice duties were more likely to be overlooked,” the spokesperson said.
“In some instances, the advice resulted in the client being double insured. Some advice resulted in the client’s superannuation being depleted. In many instances, the advice caused some financial loss to the client.
“In no instance was the client’s position improved.”
ASIC could not confirm whether NSG will offer compensation, as this was not sought as part of the relief in ASIC's proceeding.
The Federal Court’s finding is the first of its kind, the regulator said.
According to a statement yesterday, NSG had a “commission only” remuneration model, which meant that representatives would only be compensated by way of commission for sales of life insurance products and superannuation rollovers.
NSG was taken to court over financial advice provided by NSG advisers on eight specific occasions between July 2013 and August 2015.
On these occasions, clients were sold insurance and/or advised to rollover superannuation accounts that committed them to costly, unsuitable and unnecessary financial arrangements.
ASIC has sought orders that NSG pay pecuniary penalties in relation to the declarations made. A date for the hearing on penalty will be fixed by the court.
Open letter to Scott Morrison
EXCLUSIVE Now that he’s secured his leadership, Prime Minister Scott Morrison ...
FASEA open to accepting foreign qualifications
The Financial Adviser Standards and Ethics Authority has released its online for...
More advisers embracing advicetech: Report
A new report reveals that around 85 per cent of advice firms plan to invest mor...