Libertas went into liquidation in May 2023 and applied to exit the Australian Financial Complaints Authority (AFCA) in June 2024. The Australian Securities and Investments Commission (ASIC) cancelled the AFSL on 14 August.
Libertas, which was acquired by Sequoia Financial Group in August 2019, went into liquidation in May 2023. In a statement at the time, Sequoia said it planned to consolidate AFS licences, with management making the decision to transfer Libertas’ operations and customers to InterPrac Financial Planning and Sequoia Wealth Management.
The former dealer group is now managed by an external company.
An AFCA determination had previously been made against Libertas on 24 July 2023 but this was not paid by the firm. As a result, the Compensation Scheme of Last Resort (CSLR) paid an unspecific amount of compensation to the person on 24 July 2024 and notified ASIC, which prompted the cancellation.
This is the first time that ASIC has cancelled an AFSL following a payment of compensation by the CSLR.
Under CSLR rules, where the CSLR pays compensation to an eligible consumer in relation to an AFCA determination and notifies ASIC of the details of the firm that failed to pay the compensation, ASIC must cancel the AFSL of the firm.
The CSLR can pay up to $150,000 in compensation to consumers who have an unpaid determination from AFCA relating to authorised personal financial advice, credit intermediation, securities dealing or credit provision, and where other eligibility criteria are met.
All reasonable steps to obtain compensation from the financial firm must be taken before a CSLR payment can be made.
The cancellation is not subject to discretion or merits review, ASIC said.
Editor’s note:
An AFCA spokesperson clarified that Libertas remains a member of the external dispute resolution scheme.
“Under AFCA’s Constitution, proposed membership expulsions must go before the AFCA Board for consideration and decision. The AFCA Board will consider any submissions made by the liquidators of Libertas at its next board meeting on 5 September 2024,” AFCA said.
Clearly this is the business model for firms that use their own financial advisers to flog their own products.
Once you realise AFCA are onto you, declare the subsidiary insolvent, bring in an administrator who says there is no money left, and then handball it to the CSLR. Brilliant.
Milk the system for as long as you can and then leave advisers that have had nothing to do with it to pick up the tab. Meanwhile, the parent entity continues to trade without having to pay a cent.
And to continue this, CSLR only collect high-level information (ie if it is about financial advice). They do not collect data that shows these claims have been due to advisers recommending their own employers funds. Shameful.
Great business model. Good to see some executives being smarter than the life insurance company executives.
Is this the next Dixon Advisory type situation where a listed entity puts a subsidiary AFSL into administration and leaves it for the rest of the advice profession to pick up the tab? Maybe Sequoia Financial Group can provide us all with an explanation as to why they have walked away from Libertas and dumped this on the rest of the advice profession. Interprac advisers might also want to ask why they will be paying for the cost of CSLR payments because the parent company of their licensee did this. This has got to stop and every time this happens, we all need to call it out. A public inquiry is absolutely necessary to get to the bottom of this CSLR debacle.
Why aren’t fund managers and super funds a part of this compensation? People forget that product failure also contributes to client’s poor outcomes. Spread the pain Jones.
And why does the AFSL not share in the pain – they approve the Investments which Advisers must use – if that system is not working then why have AFSL’s? Seems the AFSL failed here – and isn’t it ASIC who Audits the AFSL’s?
And this is the issue with the CSLR, it creates a moral hazard. These AFSL executives just see it as a way to for advisers to fund their mistakes. Why are advisers paying for this!