An ASIC review has found that 17 per cent of clients of IOOF unit RI Advice may have been exposed to harm, one month after a judge found that one of its former advisors violated the law by steering investors towards risky investments.
An Australian Securities and Investments Commission review of the supervision, monitoring and quality of advice given by IOOF units Bridges Financial Services and RI Advice, completed in December, “contained indications of some potential client detriment” in 15 per cent and 17 per cent of the units’ respective client files reviewed.
In light of the regulator’s findings, IOOF has agreed to develop and implement remedial action plans for the units, including client review and remediation, where appropriate, ASIC said.
ASIC said it would determine whether further regulatory action was required upon reviewing the implementation and progress of the remedial plans.
Last month, Federal Court Justice Mark Moshinsky found that former RI Advice advisor John Doyle had breached the Corporations Act by failing to act in the best interests of clients and giving inappropriate advice between November 2013 and June 2016.
On the second day of trial in March, Doyle dropped his defence of the case and accepted ASIC’s case against him.
Doyle was the first individual ever to be taken to trial by ASIC under section 961Q(1) of the Corporations Act, which allows ASIC to seek civil penalties when an authorised representative of a financial licensee fails to act in the best interests of clients in providing advice.
Justice Moshinsky’s orders finalised the findings against Doyle with a penalty hearing yet to be scheduled. The judge has not made findings in relation to RI Advice.
In opening submissions, ASIC barrister Caroline Kenny told the court Doyle — who was an authorised representative of RI between May 2013 and June 2016 — gave generic advice to his unsophisticated retail clients to invest in speculative and risky financial products, known as Macquarie Flexi 100 Trust and Instreet Masti 36 and 38.
Doyle also failed to research the financial products he pushed onto his clients, many of whom were school teachers, the court heard.
IOOF is facing a Shine Lawyers-led class action alleging it engaged in serious corporate misconduct, including insider trading, front running and breaches of trustee duties.
The case accuses IOOF of misleading shareholders and failing to disclose the alleged misconduct in breach of its continuous disclosure obligations, and alleges the company’s share price plummeted after details of the bad behaviour came to light in Fairfax articles in June 2015, at a senate hearing the following month, and at the banking royal commission in 2018.
Shine’s action is largely unrelated to the unsuccessful claim by the Australian Prudential Regulation Authority and the follow-on class action withdrawn by law firm Quinn Emanuel Urquhart & Sullivan. That case claimed IOOF failed to disclose to the market the risk of an APRA investigation.
In its case, dismissed in September 2019 by Justice Jayne Jagot as “tenuous in the extreme”, APRA alleged that IOOF and five of its executives had breached superannuation laws by compensating members with $6.1 million from reserve funds.
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