Brisbane

16-429MR ASIC bans life insurance financial adviser for seven years

ASIC has banned life insurance financial adviser Mr Mateen Mohammed, of Calamvale, Queensland, from providing financial services for seven years.

ASIC’s action against Mr Mohammed, a former authorised representative of Synchronised Business Services Pty Ltd, is part of ongoing enforcement and regulatory action following ASIC’s review of life insurance advice.

As a result of ASIC's surveillance, it was found that Mr Mohammed:

  • had not maintained the high standards expected of a provider of financial services;
  • did not understand the duties and obligations imposed on a provider of financial services; and
  • could not be relied upon to discharge the duties and obligations imposed on a provider of financial services.

In particular, it was found that Mr Mohammed did not act in the best interests of his clients in that he failed to:

  • make reasonable enquires into clients' relevant objectives, financial situation and needs;
  • conduct a reasonable investigation into financial products that might achieve the objectives of the clients, including their existing superannuation and insurance products; and
  • prioritise the interests of his clients over his own.

ASIC also found that he had submitted an insurance application without his client's knowledge and as a result had misled or deceived the insurer as to his authority to do so.

ASIC Deputy Chairman Peter Kell said, 'Any advice to switch existing life insurance and superannuation products must be in the client's best interest. Where there is nothing in the client’s relevant circumstances to indicate that the switch would be beneficial, ASIC will conclude that the client is not in a better position.'  

Mr Mohammed was an authorised representative of Synchronised Business Services Pty Ltd during the relevant period, from 1 July 2010 to 22 April 2015.

Mr Mohammed has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC's decision.

Background

Outcomes following ASIC’s review of life insurance advice include:

  • in May 2016, ASIC accepted an enforceable undertaking from Michael Melamed, a former authorised representative of Synchronised Business Service Pty Ltd (refer:16-147MR)
  • in February 2016, ASIC permanently banned life insurance financial adviser Andrew Moroney (refer: 16-036MR)
  • in January 2016, ASIC accepted an enforceable undertaking from Clearview Financial Advice Pty Ltd representative, Jason Churchill (refer:16-008MR);
  • in September 2015, ASIC banned life insurance financial adviser and former authorised representative Lukas Zelka of Neo Financial Solutions Pty Ltd from providing financial services for three years (refer: 15-269MR);
  • in July 2015, ASIC banned life insurance financial adviser Brian Farber from providing financial services for four years (refer: 15-178MR);
  • in January 2015, ASIC imposed conditions on the Australian financial services (AFS) licence of Suncorp-owned Guardian Advice (refer: 15-003MR).

16-377MR ASIC permanently bans Brisbane financial adviser

ASIC has permanently banned Mr George Karakatsanis, of Yeronga, Queensland from providing any financial services.  ASIC found that he engaged in conduct that was misleading and deceptive whilst recommending clients invest in unsecured fixed interest notes in Protect Ensure. ASIC also found he failed to comply with financial services laws.

Mr Karakatsanis has been an authorised representative of various Australian Financial Services Licencees since 2003.  Between 16 July 2012 to 22 May 2014 Mr Karkatsanis was an Authorised Representative of Protect Ensure Pty Ltd.  

ASIC found that Mr Karakatsanis:

  • engaged in conduct that was false and misleading by making false statements about the features of financial products that were likely to induce clients to acquire the products;
  • deliberately misled clients so that they did not understand the basic features of the financial products he was recommending they invest in;
  • engaged in misleading and deceptive conduct by failing to properly disclose that investor funds were being invested in Protect Ensure and thus constituting a direct conflict of interest;
  • failed to act in his clients' best interests by failing to disclosure this conflict of interest;
  • failed to act in his clients' best interests by ignoring their circumstances, objectives, financial situations and needs when recommending they invest in Protect Ensure;
  • failed to give provide appropriate advice; and
  • failed to provide Statements of Advice.

Subsequently, partly due to Mr Karakatsanis' conduct, clients' funds were used improperly, such as to pay Protect Ensure's business related expenses. As a result, some investors lost their invested funds entirely.

ASIC has determined that Mr Karakatsanis is not of good fame and character, making him an unsuitable person to provide financial services. 

'Mr Karakatsanis's conduct falls far short of the high standards expected of those in the financial services industry. ASIC will continue to protect consumers from advisors who engage in misleading conduct and place their interests above those of their client.'  ASIC Deputy Chairman Peter Kell said.

Mr Karakatsanis has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC's decision.

Background

On 15 December 2014, ASIC cancelled the AFS Licence of Protect Ensure as a result of Protect Ensure not having adequate financial resources to provide the services covered by the Licence and to carry out supervisory arrangements as required by s912A(1)(d) of the Corporations Act. (refer: 14-338MR).

Protect Ensure was placed into liquidation on 12 June 2015.

On 30 June 2015, ASIC permanently banned Mr Lee Robert Robin, of Camp Hill, Queensland from providing any financial services.  ASIC found that he engaged in conduct that was misleading or deceptive whilst issuing unsecured fixed interest notes in Protect Ensure. (refer: 15-161MR).

 
Financial Planner
 

16-374MR ASIC bans Brisbane life insurance financial adviser for five years

ASIC has banned Mr Christopher Young, a life insurance financial adviser, from providing financial services for a period of five years.

Mr Young was an authorised representative of Affinia Financial Advisers Pty Ltd (Affinia) in the period 12 June 2013 to 23 July 2015.

ASIC commenced surveillance on Mr Young in mid-2015, which included a review of a number of his client files from the time he was an authorised representative of Affinia.

As a result of the surveillance, ASIC found that Mr Young had failed to act in his clients' best interests when providing advice and that he had failed to comply with several financial services laws.

In particular, it was found that Mr Young failed to:

  • provide sufficient detail in Statements of Advice to enable his clients to make informed decisions about his advice;
  • keep proper records; and in some instances, he had created false or misleading client file notes; 
  • make reasonable enquires into clients' relevant objectives, financial situation and needs;
  • determine if the amounts of insurance cover he recommended were appropriate and if premiums were affordable and payment could be maintained by clients;
  • conduct a reasonable investigation into financial products that might achieve the objectives of the clients;
  • provide the required information about his remuneration and other relevant interests when providing financial product advice; and 
  • demonstrate the ability, professional skills and knowledge required to competently provide financial services.

ASIC Deputy Chairman Peter Kell said, 'Consumers should be confident that their financial adviser is acting in their best interests'.

'The business model of simply 'selling' life insurance without complying with the legal and regulatory obligations will not be tolerated by ASIC. Advisers who do so will be removed from the industry.'

Background

ASIC's action was a response to information it received from the licensee, Affinia, regarding potential systemic concerns about advice provided by Mr Young in relation to insurance and superannuation products. 

Following the identification of these concerns, and after Mr Young had ceased as a representative of Affinia in July 2015, Affinia reviewed all advice provided by Mr Young and implemented a remediation program for affected clients who had received advice from him.

16-326MR ASIC acts to freeze sale of land proceeds in excess of $100 million pending disclosure to investors

Following an application made by ASIC on 19 August 2016, the Federal Court of Australia has made orders limiting the ability of Aviation 3030 Pty Ltd (Aviation) to deal with the proceeds of sale of property it owns in Victoria.

The Aviation property was purchased in 2011 by Aviation, which raised funds for this purpose from around 70 shareholders and unitholders.

Aviation consented to the orders being made.

ASIC commenced its investigation into Aviation in May 2016. In the course of its investigation, ASIC became aware that: 

  • in March 2016, Aviation had issued shares to companies associated with a director and a former director of Aviation, purportedly pursuant to an Aviation letter dated 4 May 2011 and an option agreement dated 18 September 2012 entered into by the then directors of Aviation ('the 2016 share issue'); 
  • this resulted in a substantial dilution of the interests of investors, and an increase in the interests controlled by the directors of Aviation and their associates; 
  • neither the 4 May 2011 letter nor the 18 September 2012 option agreement had been disclosed to investors prior to their investments in Aviation and the 2016 share issue had also not been disclosed to all investors; and  
  • in May 2016, Aviation received an offer from a third party to purchase the Aviation property for more than $100 million and that this offer had not been disclosed to all investors. ASIC's understanding was that this property was expected to be sold within a short timeframe.

Based on these matters, ASIC was concerned that the proceeds of sale of the Aviation property would be distributed in accordance with the 2016 share issue. This was in circumstances where investors had not been provided with proper disclosure in relation to the dilution of their interests, either at the time of their investments or subsequently.   

ASIC obtained the orders to protect the interests of investors and specifically to enable them to be provided with:

  • information as to the 2016 share issue (and the documents purportedly relied upon by Aviation for that purpose);
  • details of the proposed sale of the Aviation property; and
  • an opportunity to decide whether to obtain independent advice concerning their investments. 

As part of an agreement reached with ASIC, Aviation undertook to provide disclosure to the Investors in relation to these matters, in a form agreed to by ASIC. Aviation has advised ASIC that it has completed this process.

Developments subsequent to the orders

Aviation has advised ASIC that the offer to purchase the Aviation property has been withdrawn.

The Orders will remain in place until further order of the Federal Court. The matter returns to the Federal Court on 25 November 2016.

ASIC's investigation into Aviation is ongoing.

16-322MR ASIC bans Brisbane financial advisor

ASIC has permanently banned Mr Sandeep Madhoji from providing financial services or  engaging in credit activity after he was sentenced to imprisonment for fraud charges. This prosecution was the result of a joint operation between the Queensland Police Service and ASIC. 

The charges stemmed from conduct that occurred between 2 September 2010 and 11 July 2012. During this period, Mr Madhoji misused clients' funds by applying some client's funds to cover the loss made on other client portfolios.

As a result of Mr Madhoji's actions, 14 clients collectively lost $3,251,281. These losses were incurred by Mr Madhoji using his recommended trading strategy.

Mr Madhoji made false statements to his licence holder Redwood Capital Group and to his clients to conceal his losses. He acted outside his authority by making multiple unauthorised transfers and withdrawals from the accounts to hide the losses. Mr Madhoji also falsified client account statements in relation to the relevant transactions.

Mr Madhoji committed these offences to enhance his reputation to clients and create an illusion that he was a highly successful trader.

ASIC Deputy Chairman Peter Kell said, 'Dishonesty by any financial advisor will not be tolerated by ASIC. We will investigate and prosecute instances of dishonesty to ensure that consumers have confidence in the financial system.'

Background

On 26 August 2016, Mr Madhoji was sentenced to 7.5 years imprisonment with a non-parole period of 22 months in the Brisbane District court on 55 charges of fraud under sections 408C of the Queensland Criminal Code.  

Mr Madhoji was an Authorised Representative under Redwood Capital Group Pty Ltd, AFSL No. 289327. AFSL No. 289327 held by Redwood Capital Pty Ltd was cancelled on 9 April 2013.

Mr Madhoji's status as an Authorised Representative was ceased on 1 July 2012.

This matter was prosecuted by the Queensland Director of Public Prosecutions.

16-312MR ASIC permanently bans former company director in relation to fraudulent misappropriation

 

ASIC has permanently banned Mr Steven William Hill from engaging in credit activities and providing financial services.

An ASIC investigation found that between January 2006 and February 2007, Mr Hill, through Hill Stephens & Associates Pty Ltd and International Finance Consortium (Aust) Pty Ltd induced various investors to pay approximately $618,000 to acquire interests in a 'house and land' property development located in Queensland.

Mr Hill was found guilty of fraudulently misappropriating $281,000 of the invested funds, which were directed to company bank accounts to make payments to Mr Hill and other third parties.

On 18 April 2016, His Honour Acting Judge Garling sentenced Mr Hill to 2 years and 9 months jail for fraudulent misappropriation (refer: 16-118MR).

Following the sentencing, ASIC determined that Mr Hill should be permanently banned as he was convicted of offences involving dishonest and fraudulent conduct.

ASIC Commissioner Peter Kell said Mr Hill's misconduct was very serious.

'ASIC will ban people from the finance industry who act dishonestly and place personal interests ahead of those they service.  Mr Hill's actions exposed vulnerable members of the community to financial loss and hardship', Mr Kell said.

Mr Hill has the right to appeal to the Administrative Appeals Tribunal for review of ASIC’s decisions.

Background

ASIC investigations revealed that between January 2006 and February 2007, Mr Hill met with various investors based in New South Wales.  Describing himself as a 'financier/consultant', Mr Hill, through his company Hill Stephens & Associates Pty Ltd, told investors he would be able to provide them with investment opportunities to build their wealth towards retirement.

Mr Hill advised investors their funds would be used as 'seed capital' in a number of Queensland based property developments he was facilitating. Mr Hill advised investors that they would receive returns of between 10 - 30% per annum, however, unknown to the investors, funds paid were not invested in the property developments as originally advised by Mr Hill.

In June 2013 Mr Hill was charged with eight counts of fraudulent misappropriation (refer: 13-146MR).

In March 2015 Mr Hill was ordered to stand trial on seven counts of fraudulent misappropriation (refer: 15-050MR).

In March 2016 Mr Hill was convicted on 6 counts of fraudulent misappropriation by a Sydney District Court jury after a four-week trial. (refer: 16-072MR).

Mr Hill was found not guilty of one charge of fraudulently misappropriating $150,000.