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.
FASEA’s lack of recognition of prior study is seeing older advisers move into mortgage broking, according to a dealer group chair. ...
The former director of a recently wound up Sydney practice has been charged with making a false statement to ASIC. ...
The FPA is currently working on a digital SOA alongside ASIC that would “effectively have no paper involved at all”. ...