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Australian court curbs operation of wealth business pending trial

Chris Hamblin, Editor, London, 11 May 2017

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The Australian Securities and Investments Commission has obtained a court order which requires Yes FS to change the way it deals with its HNW clients.

The order is to have effect until the beginning of the trial of the business for alleged breaches of the Corporations Act and the ASIC Act, including breaches of its obligation to act in clients' best interests.

The Federal Court made the order against three entities operating as the "Yes FS" business, namely:

  • Wealth and Risk Management Pty Ltd (WRM), the holder of an Australian financial services licensee;
  • Jeca Holdings Pty Ltd (which trades as Yes FS and does not hold an AFS licence); and
  • Yes FP Pty Ltd (which is a representative of WRM's).

The court made the order on the basis that there was an 'appreciable risk' that WRM would not prevent breaches of the 'best interests' obligation of the Corporations Act by its representatives and that the Yes FS business would breach the obligation not to operate a financial services license without an AFS licence.

The order prohibits:

  • the Yes FS business from making, offering or promoting cash payments to prospective clients in connection with the provision of financial advice in relation to superannuation or the purchase of insurance products;
  • the promotion of such payments on the internet; and
  • Jeca Holdings Pty Ltd from carrying on a financial services business.

The injunctive order is in place from 3pm on 8 May 2017 until the start of the  trial on 2 October 2017. ASIC opened the proceedings in March.

At trial, ASIC will ask the court to declare that WRM breached its obligations to make its representatives comply with their 'best interests' obligation and provide appropriate advice to their clients, and that the Yes FS business has engaged in misleading and deceptive conduct.

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