ASIC used Dover whistleblowing to shut licensee down

ASIC used Dover whistleblowing to shut licensee down

When Dover Financial flagged one of its advisers to ASIC for exploiting low-wealth clients, it used the report as justification to have the licensee shut down from as far back as 2016, new documents reveal.

In June 2018, ASIC said it intended to cancel Dover’s licence due to compliance issues but didn’t reveal any further details.

However, an ASIC Financial Services Enforcement (FSE) team document shows that the corporate regulator had been wanting to take action against Dover and its director, Terry McMaster, since 2016.

In the document, ASIC justified the action by saying “Dover’s arrangements for the monitoring and supervision of representatives are inadequate”.

Further, it said that when adviser misconduct is identified by Dover, it “fails to take appropriate steps to remediate the client in relation to the advice they have been provided”.

“Following engagements with FSE we would seek to consider action against McMaster under s1101B, specifically pursuing an order that McMaster is prohibited from providing financial services and prohibited from being involved in the provision of financial services so that he can no longer operate Dover,” the document read.

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“Due to the level of operational control exercised by McMaster in relation to Dover, there is no possibility of any change within the compliance framework of Dover without his removal.

“Depending on the time frames, this may also require injunctive action against McMaster under s1324.”

But emails seen by ifa reveal that Dover reported banned adviser Joshua Fuoco to ASIC on two occasions – once in 2013 and again in 2015.

Dover’s whistleblowing in 2015 led to ASIC ordering Wealth Risk Management, a firm of which Mr Fuoco was a director, to pay $7.8 million in penalties.

ASIC said the penalty related to conduct that resulted in “substantial erosion of the client's superannuation balances”.

Speaking to ifa, Mr McMaster said ASIC then used the information to allege that he was running a premature release of super scheme and running SMSF property scams like the ones that were run by Mr Fuoco.

In addition, Mr McMaster said he continually asked for meetings with ASIC, but ASIC refused to meet or in any way discuss its concerns.

“If ASIC [had agreed] to a meeting with a non-bank AFSL, these issues could have [been] sorted out. I was also undertaking to adopt any changes ASIC required. Again, no response,” he said.

“ASIC only had to ring. But it never did. You should see what happened when a bank AFSL rang ASIC. It’s chalk and cheese. The ASIC senior executive team scrambled to be there. They could not meet fast enough.”

Earlier this week, court documents showed that ASIC conceded that it had no evidence to date that any client was deceived or misled by Dover Financial’s Client Protection Policy.

More to come.

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