Court Imposes $11 Million Penalty on Advice Firm for Breaching Remuneration Rules

4

DOD Bookkeeping, now in liquidation, had previously incentivized three financial advisers by paying them a total of $130,250 in bonuses. These advisers were found to have improperly encouraged clients to roll over their superannuation into self-managed superannuation funds (SMSFs) and subsequently purchase properties through Equiti Property, a related entity. Each bonus payment ranged from $750 to $1500, with advisers receiving multiple bonuses each year.

Equiti Financial Services offered a suite of services, including financial advice, SMSF establishment and administration, real estate recommendations through Equiti Property, and mortgage broking via Equiti Finance. However, its Australian financial services licence was revoked by ASIC in November 2024, following a payment from the Compensation Scheme of Last Resort.

During the court proceedings, testimonies from 12 clients surfaced, highlighting the firm's failure to tailor financial advice to personal circumstances. Evidence showed that two advisers earned almost $240,000 annually, with nearly 40 percent of their income stemming from bonuses—heightening concerns of conflicted advice.

The court's judgment emphasized the detrimental influence the bonus payments had on the advisers' recommendations, violating the conflicted remuneration laws introduced in 2013 under the Future of Financial Advice reforms. These laws aim to prevent financial advisers from receiving incentives that could bias their advice or product recommendations.

This ruling underscores the rigorous standards expected in Australia's SMSF sector and highlights the legal responsibilities of financial advisers to act in clients' best interests. ASIC's commitment to enforcing these standards seeks to uphold the integrity of financial advice and protect consumers from biased product promotions.

As part of its ongoing efforts to enhance accountability within the financial sector, ASIC plans to ramp up scrutiny of SMSF advice. This includes conducting comprehensive reviews, with the findings due in late 2025. The sector faces mounting pressure to raise operational standards and restrict access to SMSFs to suitable candidates, particularly as more claims may implicate the Compensation Scheme of Last Resort.

ASIC Deputy Chair Sarah Court highlighted the significance of the penalty, emphasizing the need for financial service licensees to prioritize client interests above all. This judgment serves as a stern warning to firms that exploit contractual loopholes for financial gain at consumers' expense.

Published:Friday, 2nd May 2025
Source: Paige Estritori

Share this news item:

Finance News

Clear

ASIC Releases Updated Legislation for Financial Advice

16 Sep 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has introduced a new, consolidated legislative instrument that relates to financial advice. This update follows through on ASIC's May announcement regarding the remake of three existing advice-related instruments. - read more

Commonwealth Bank Challenges RBA's Card Fee Reform

12 Sep 2025: Paige Estritori

Australia’s leading financial institution, the Commonwealth Bank of Australia, has openly criticised the Reserve Bank of Australia (RBA) for its calculations related to a proposed reduction in debit and credit card transaction fees. The RBA suggested that the reform would save Australian businesses $1.2 billion annually and benefit the majority of companies, a claim that the Commonwealth Bank strongly disputes. - read more

Ongoing Consumer Spending Surge Threatens Future Interest Rate Cuts

11 Sep 2025: Paige Estritori

Amid a period of robust consumer spending, Australia's mortgage holders may face limited future interest-rate cuts. The Commonwealth Bank has observed Australians increasing their spending over the last six months, spurred by rising incomes, a robust job market, and previously lowered interest rates. - read more

CSLR Funding Concerns as Special Levy Decision Remains Pending

11 Sep 2025: Paige Estritori

The Compensation Scheme of Last Resort (CSLR) recently highlighted potential delays in compensation payments due to insufficient special levy funds. In July, the CSLR's proposed FY2025–26 levy plan allocated $67.29 million for financial advisers, surpassing the $20 million limit set for the subsector. This shortfall of $47.29 million prompted the Treasury to initiate a consultation in August to determine funding solutions for the excess levy. - read more

Retiree Surge to Drive Demand for Financial Advisers in Australia

10 Sep 2025: Paige Estritori

A recent study by Adviser Ratings, as outlined in the 2025 Australian Financial Advice Landscape Report, indicates that the number of financial advisers in Australia will need to increase significantly. From the present count of 15,500 advisers, the industry is expected to require more than 50,000 over the next thirty years to cater to a growing retiree population. - read more

FAAA Advocates Balance in Non-Compete Reform for the Financial Sector

10 Sep 2025: Paige Estritori

The Australian government is examining potential reforms to non-compete clauses in employment contracts, driven by concerns that current laws may impede workers from advancing their careers and, in turn, hinder economic growth. In this context, the Financial Advice Association Australia (FAAA) has raised concerns about these reforms, urging that the proposed changes should balance the interests of both employees and employers. - read more

Aussie Incomes Lag in OECD Amid Productivity Concerns

09 Sep 2025: Paige Estritori

Australia has recorded a sluggish rise in real per capita household disposable income over the past decade, making it the slowest growth among major English-speaking countries. According to OECD data, from Q1 2015 to Q1 2025, Australian incomes only increased by 3.5%, starkly contrasted with Canada's 8.9%, the United States' 20.6%, and the United Kingdom's 8%. The OECD average during this period was 18.7%, further highlighting Australia's economic challenges. - read more

Click for more Finance News