A former financial adviser and director of a financial institution (FI) in Brisbane, Australia, has been sentenced to 12 years imprisonment with parole eligibility after six years, including the 977 days of pre-sentence custody declared as time already served.
The offences occurred between August 2013 and November 2015, resulting in a total detriment of $5,958,870 to 12 clients.
The former financial adviser told his clients they were investing in a diversified fund that invested in cash, property, shares, aquaculture, and agriculture. In reality, the only investment was an abalone farm operated by entities he controlled in South Australia.
As the presiding judge expressed in sentencing remarks, “His actions were not only criminal but evil, demonstrating no remorse”. He went on to describe how the conduct of the perpetrator was ‘brazen, gross and callous’, leading to a gross breach of trust which had caused victims to suffer substantial personal and financial harm.
Where the Case Began
The perpetrator was originally sentenced to 12 years’ imprisonment in October 2019 for the scheme. He then appealed the case in November 2019, which was heard by the Queensland Court of Appeal in November 2021. The conviction was quashed, and a retrial was ordered in June 2022.
In 2020, faced with the uncertainty of further outcomes, a couple affected by the perpetrator’s scheme wrote to the Treasury urging to fast-track the implementation of the Compensation Scheme of Last Resort (CSLR) and make critical changes to the eligibility criteria.
In the letter detailing how they had lost $260,000 due to this scheme, the couple expressed, “To find oneself in this hopeless situation through no fault of your own when nearing or at retirement age is heartbreaking.
“In the three years since our investment was deemed valueless, we have sold every asset we owned apart from our home and cars to attempt to recoup some losses.”
The CSLR was established under legislation on 22 June 2023 and was considered a significant step in enhancing consumer protection in the Australian financial services sector. It now facilitates payments of up to $150,000 in compensation to eligible consumers who have experienced misconduct by a financial firm and where the firm has not made recompense generally due to insolvency.
ASIC’s Commitment to Pursuing Criminals in the Financial Sector
Australian Securities & Investments Commission (ASIC) deputy chair Sarah Court added: “ASIC is committed to pursuing criminals who commit serious harm against individuals and act dishonestly, as was the case here. [The perpetrator’s] actions betrayed the trust of his clients with some clients at or near retirement age and caused them significant financial harm. This sentence demonstrates that such behaviour will not be tolerated.”
Read more about the case in ASIC’s media release.
The regulator is also asserting its strength regarding enforcement activity and outcomes. ASIC chair Joe Longo recently addressed the Parliamentary Joint Committee on Corporations and Financial Services, detailing the commission’s recent activities and strategic direction.
As of 30 April 2024 (over a 12-month period), Longo reports that ASIC has:
- Commenced over 130 new investigations—an increase of around 25% on the previous year.
- Filed 29 new civil proceedings in the Federal Court (against 64 defendants)—an increase of 11% on the previous year.
- Engaged in investigations that led to 23 individuals being charged with criminal offences and 16 convictions with $936,000 in fines ordered by the courts.
Longo comments, “ASIC is one of the nation’s most active law enforcement agencies”, noting the regulator’s records show it is securing “materially higher penalties than it did a decade ago”.
Read more from the Parliamentary Joint Committee Opening Statement.
What Can FIs Do to Identify Red Flags?
The case is a stark reminder that conflicts of interest can occur at all levels within an FI. However, every firm deserves the tools to operate with confidence and safeguard its reputation.
Simply having systems in place to monitor conflicts and suspicious activity is no longer enough. The proper technology plays a vital role in helping your firm proactively identify red flags and minimise risk. Review your technology and ensure it will:
- Track and manage conflicts of interest.
- Proactively flag suspicious activity, including within electronic communications (eComms).
- Help manage ongoing learning and licensing requirements to ensure employees are deemed “fit and proper” for the requirements of their roles.
- Make it easy for employees to declare conflicts and provide attestations.
- Quickly produce detailed reporting required by regulators upon examination.
MyComplianceOffice (MCO) exists to make effective monitoring and analysis of questionable employee activity a reality—and help firms stay out of regulators’ spotlights.
MCO’s integrated compliance management suite enables firms to identify conflicts of interest more efficiently across their organisation. MCO provides a consolidated platform for compliance teams to monitor and manage close personal relationships, personal account dealing, MNPI, outside business activities, gifts, entertainment, and hospitality, and more.
When it comes to surveillance of electronic communications, MCO’s eComms Review solution enables firms to detect, prevent, and measure potentially harmful, unethical, or unlawful messages sent by their employees. It uses advanced AI risk-scoring and classification to alert compliance teams to risky communications while also identifying patterns across multiple channels that may warrant investigation, employee training, or policy adjustment.
eComms Keep helps firms prove the maintenance and preservation of communications records to regulatory bodies. Data from various sources, including email, SMS, Skype, WhatsApp, Signal, Bloomberg, Reuters, ICE Chat, Microsoft Teams, and more, is securely preserved while producing easily viewable audit trails.
Additionally, MCO also offers a streamlined Representative Registrations and Licensing (RRL) module. The technology supports the ongoing learning and licensing requirements set by regulatory bodies and ensures employees are deemed fit and proper for their role responsibilities—in a scalable manner that reduces the load on Managers and Registrations Teams.
Learn more about these solutions and how MCO can help your firm reduce reputational risk from employees engaging in questionable or even criminal activities.
Representative Registrations and Licensing (RRL)
Your Ultimate Guide to Conflicts of Interest
