StatePlus sued for phantom financial advice

Source: FNG Gerald Segal 2020-08-20

Australia financial regulator ASIC has announced that it has commenced civil penalty proceedings in the Federal Court against State Super Financial Services Australia Limited (StatePlus) for charging at least 36,592 members fees for financial advice that StatePlus promised it would provide, but did not provide.

ASIC alleges that from 1 April 2013 to 30 June 2018, StatePlus:

charged at least 36,592 members fees for financial advice it promised to provide (Fees for No Service) but did not provide. This included the promise of an annual financial planning review (Annual Review) and to contact members as part of the Annual Review;
issued defective disclosure documents or statements that included promises to provide annual financial advice to members in circumstances that StatePlus did not have reasonable grounds for believing it could provide;
failed to establish and maintain the appropriate internal procedures, measures and controls to ensure that, as far as reasonably practicable, it could provide or would be able to provide the promised annual financial advice; and
contravened its overarching obligations as an Australian financial services (AFS) license holder to act efficiently, honestly and fairly.

ASIC is seeking declarations and pecuniary penalties from the Federal Court.

The maximum civil penalty for contraventions alleged against StatePlus are between $1,700,000 and $2,100,000 per contravention for accepting payment without being able to supply as ordered.

StatePlus has remediated over $100 million to members affected by its conduct.

At the relevant time, StatePlus was the RSE licensee for the StatePlus Fixed Term Pension Plan and the StatePlus Retirement Fund (Funds). As at 30 June 2017, the Funds had over $17 billion under management in respect of over 75,000 members.

ASIC said it has been monitoring remediation for fees for no service failures by financial services institutions including StatePlus.

StatePlus’ conduct was the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

This is the third enforcement action commenced by ASIC concerning fees for no service activity. In September 2018, ASIC commenced proceedings in the Federal Court of Australia against two entities in NAB’s wealth management division, NULIS Nominees (Australia) Limited (NULIS) and MLC Nominees Pty Ltd (MLC Nominees). The court proceedings relate to fees charged by both entities to a significant number of their superannuation members for services not provided. The hearing has concluded and judgment in these proceedings on liability and penalty has been reserved.

In December 2019, ASIC commenced civil penalty proceedings in the Federal Court against National Australia Bank Limited (NAB) for alleged contraventions of the ASIC Act and the Corporations Act for FFNS activity. These proceedings are being case managed by the court to trial, a date is yet to be scheduled.

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StatePlus sued for phantom financial advice

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