The Australian Securities & Investments Commission (ASIC) has commenced proceedings against NSG Services Pty Ltd (NSG) for breaches of the ‘best interests duty’. The ‘best interest duty’ is contained in section 961B(1) of the Corporations Act and requires an advice provider, when providing personal advice to a client, to act in the best interests of the client in relation to that advice.
NSG is licensed to provide personal advice on risk insurance and superannuation products to retail clients. NSG employs advisers to provide financial services advice on its behalf as its representatives. ASIC is alleging that NSG failed to take reasonable steps to ensure its advisers complied with the best interests duty and that, on numerous occasions, NSG advisers did not act in the best interests of their clients.
ASIC is also alleging the following breaches by NSG:
- NSG did not provide appropriate training to its advisers to ensure advice given to clients was in their best interests. Instead, ASIC alleges NSG trained its advisers that it is almost always in a client’s best interest to take out some form of life insurance, regardless of their financial situation;
- NSG’s written policies regarding legal and regulatory compliance are inadequate and have not been followed or enforced;
- On eight specific occasions, because of advice provided by NSG advisers, clients were sold insurance and/or advised to rollover superannuation accounts that committed them to costly, unsuitable and unnecessary financial arrangements; and
- NSG did not conduct regular or substantive performance reviews of advisers or take disciplinary action against advisers who were not acting in compliance with the Corporations Act.
The hearing is listed for 8 July 2016. This is the first civil penalty action ASIC has taken against a licensee alleging breaches of the best interests duty. The hearing is listed for 8 July 2016. The commencement of these proceedings shows that ASIC will take a firm approach to compliance with the best interests duty.