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ASIC - FINANCIAL SERVICES - BANNING ORDER - Banning order under ss 920A and 920B of the Corporations Act - applicant banned by ASIC from providing financial services for 18 months - whether applicant contravened s 920A(1)(e) - decision set aside

Administrative Review Tribunal Act 2024 (Cth)

Australian Securities and Investments Commission Act 2001 (Cth)

Corporations Act 2001 (Cth)

Australian Securities and Investments Commission v Adler [2002] NSWCA 483

Australian Securities and Investments Commission v DOD Bookkeeping Pty Ltd (in liq) [2023] FCA 1622

Australian Securities and Investments Commission v McCormack [2017] FCA 672

Australian Securities and Investments Commission v NSG Services Pty Ltd [2017] FCA 345

Australian Securities and Investments Commission v Ultiqa Lifestyle Promotions Limited (in liq) [2022] FCA 561

Australian Securities and Investments Commission v Westpac Securities Administration Ltd [2019] FCAFC 187

McDonald v Director-General of Social Security (1984) 1 FCR 354

Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129

Schroeder and Australian Securities and Investments Commission [2021] AATA 3519

Australian Securities and Investments Commission Regulatory Guide 98: ASIC's powers to suspend, cancel and vary AFS licences and make banning orders (November 2022)

ASIC Regulatory Guide 175 ‐ Licensing: Financial product advisers - Conduct and disclosure (December 2012, October 2013, March 2017, June 2021)

1. On 23 April 2021, a delegate of the respondent, the Australian Securities and Investment Commission (ASIC), made an order pursuant to ss 920A(1)(e) and 920B of the Corporations Act 2001 (Cth) (Corporations Act) prohibiting the applicant, Mr Bradley Smith (Mr Smith), from providing any financial services for a period of 18 months (the Banning Order).[1]
2. Mr Smith made an application for review to the General Division of the Administrative Appeals Tribunal (the AAT)[2] seeking that the Banning Order be set aside. [3]
3. At the hearing the following witnesses gave evidence:

(a) Mr Smith (the applicant). > > (b) Mr M (a client of Mr Smith) (Mr M). > > (c) Mr H (a client of Mr Smith) (Mr H). > > (d) Mr P (a client of Mr Smith) (Mr P). > > (e) Mr C (a client of Mr Smith). (Mr C) > > (f) Mr T (a client of Mr Smith) (Mr T). > > (g) Mrs S (a client of Mr Smith) (Mrs S). > > (h) Ms Jodie McInnes (a financial planner who has audited and mentored Mr Smith since the Banning Order; she additionally gave opinion evidence as an expert financial planner) (Ms McInnes). > > (i) Mr Dawson (a financial planner in the employ of ASIC who gave opinion evidence as an expert financial planner) (Mr Dawson).

4. Mr Smith was represented by Mr Aleksov of counsel, instructed by Roberts Gray Lawyers. Mr Seefeld of counsel, instructed by ASIC, represented ASIC.
5. The Tribunal admitted into evidence the exhibits which are listed in the annexure to these reasons.

1. Mr Smith has been a self-employed financial planner since 1991.[4] His practice extends from Rockhampton and to other areas, including Mackay, Brisbane and the Gold Coast.[5]
2. Mr Smith obtained his certification as a financial planner in 2003.[6]
3. Since 31 May 2012 Mr Smith has been an authorised representative of Advice Evolution Pty Ltd (Advice Evolution).[7]
4. Advice Evolution holds an Australian Financial Services Licence (AFSL) and operates as financial planning business, independent of institutional ownership.[8]
5. The Tribunal notes that an unusual characteristic of the proceedings was that Mr Smith called 6 witnesses to give evidence in support of him that were the same clients in the 6 client files relied upon by ASIC to establish that Mr Smith had breached his duties to them under the Corporations Act, leading to the Banning Order.
6. The Tribunal has anonymised the details of the clients and their evidence to protect their privacy and confidential information.
7. The Tribunal orders pursuant to s 70(2) of the Administrative Review Tribunal Act 2024 (Cth) that the information given to the Tribunal in respect of each of the clients of Mr Smith filed in the Tribunal or tendered as evidence in the hearing is prohibited from publication or disclosure, except by leave of the Tribunal.

1. In the ASIC Closing Submissions (ASIC CS) the issues for determination were framed as:[9]

(a) Is the power under s 920A(1) of the Corporations Act enlivened? > > (b) If so, should Mr Smith be prohibited from providing financial services? > > (c) If so, for what period should Mr Smith be prohibited from providing financial services?

2. Mr Aleksov did not quibble with ASIC's characterisation of the issues for determination but contended that ASIC had not met their 'burden of persuasion' to the Tribunal that Mr Smith had contravened ss 920A or 920B of the Corporations Act.

Preliminary Issue - Contravention Allegations of non-compliance with ss 947C and 947D of the Corporations Act

1. On the final day of hearing, Mr Aleksov objected to that part of the ASIC CS, that alleged Mr Smith contravened ss 947C and 947D of the Corporations Act[10], on the basis that it was procedurally unfair to introduce allegations not previously made, or subject of evidence during the hearing.
2. Those sections of the Corporations Act deal with the statutory requirements for the contents of statements of advice (SoA) given by authorised representatives.
3. To address Mr Smith's statutory compliance of the SoA in evidence would require each of them to be compared with the particularised requirements contained in ss 947C and 947D of the Corporations Act.
4. That exercise was not carried out during the hearing and those allegations and particulars were not put to Mr Smith or any other witness during the hearing.
5. Mr Dawson for ASIC stated in cross-examination in that regard that he was not asked to 'examine or opine on the adequacy of Mr Smith's statements of advice'.[11]
6. ASIC's submissions do not carry out that necessary comparison and analysis either.
7. The Tribunal put to Mr Seefeld whether ASIC expected the Tribunal to do it on its behalf.
8. Mr Seefeld properly conceded that ASIC had not previously raised contraventions of ss 947C and 947D of the Corporations Act against Mr Smith and ASIC did not want to lead the Tribunal into procedural unfairness in making its determination. Nor did ASIC expect that the Tribunal on its own initiative to undertake the analysis required to determine if there was a possible contravention of ss 947C and 947D of the Corporations Act.
9. The Tribunal is reasonably satisfied that it would be procedurally unfair to Mr Smith for the Tribunal to consider or make any finding in respect to the alleged contraventions of ss 947C and 947D of the Corporations Act and excludes those allegations from its reasons.

1. ASIC has helpfully provided the legislative framework in the ASIC CS.[12]
2. The Tribunal does not replicate the provisions of the Corporations Act in these reasons, but in summary:

(a) Chapter 7 of the Corporations Act is concerned with financial services and markets and provides the objects of the chapter is to promote, amongst other things, informed consumers being provided suitable financial products in 'fair, orderly and transparent markets for financial products' that reduces systemic risk and provides for 'fairness, honesty and professionalism' by financial services providers. > > (b) The statutory requirement for financial services providers to act in the best interests of their clients is at s 961B of the Corporations Act. This section has a procedural requirement, not a qualitative one[13]. It provides: > > > (i) At ss (1) that 'The provider must act in the best interests of the client in relation to the advice'. > > > > (ii) At ss (2) that the provider satisfies the duty in ss (1) if the provider proves that they have done each of the listed requirements in the sub-section. Described as a 'safe harbour' provision, ss (2) means 'The Provider can effectively prove that their purpose or object was to act in the best interests of the client by doing each of the matters in s 96B(2), each of which is essentially procedural'.[14] > > > > (iii) But, 'it does not follow from a failure to prove one or more of the matters set out ins s 961B(2) that a failure by the provider to act in the best interests of the client has been established'.[15] > > > > (iv) Rather, a breach of ss (1) 'depends upon all the circumstances including the nature and extent of the failure to comply with s 961B(2)'.[16] > > (c) Section 961G provides that the resulting advice from s 961B must satisfy the conclusion 'that the advice is appropriate to the client, had the providers satisfied the duty under s 961B to act in the best interests of the client'. > > (d) Section 961J requires that priority is given to the client's interests over those of the provider of advice where 'the provider knows, or reasonably ought to know, that there is a conflict between the interests of the client and the interests of' defined parties in ss (1). > > (e) ASIC has the power in s 920A(1)(e) of the Corporations Act to make a banning order 'where a person has not complied with a financial services law' or 'ASIC has reason to believe that the person is likely to contravene a financial services law'. > > (f) When making a banning order, s 920B of the Corporations Act provides that ASIC may specify the person is prohibited from doing certain conduct and such prohibitions to be for specified periods, or permanently.

3. The Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) is also relevant as s 1(2) of the ASIC Act provides:

(a) maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy; and

(b) promote the confident and informed participation of investors and consumers in the financial system.

1. A primary purpose of the ASIC Act is the objective of protecting the public from harm.
2. Relevantly, in part, to these proceedings, prior to 20 October 2016 there was no obligation under the Corporations Act for providers to keep records in the provision of advice to clients.

Are Contraventions of s 920(1)(e) of the Corporations Act Established

1. There are 6 client files that must be individually considered to determine if ASIC has established that Mr Smith has breached s 9201(1) of the Corporations Act.
2. The 'burden of persuasion' as to any contraventions of the Corporations Act is said by Mr Smith to fall on ASIC. No such onus arises under the Corporation Act.
3. The better descriptor of the 'burden' on ASIC is that s 56 of the Administrative Review Tribunal Act 2024 (Cth) (ART Act) provides an obligation on ASIC to 'use their best endeavours to assist the Tribunal to: (a) make the correct or preferable decision in relation to the proceeding; and (b) achieve the objective in section 9' as the Tribunal 'stands in the shoes' of ASIC with all the powers of ASIC to review the decision[17].
4. The Tribunal is not bound by the rules of evidence[18], but must ensure procedural fairness to the parties to present their case, make submissions and adduce evidence[19].
5. This is not a controversial approach to decision making in the Tribunal, there are numerous authorities that express the simplified description provided by the Tribunal above with greater eloquence.[20]
6. ASIC called Mr Dawson, who at the relevant time, was a senior analyst in the financial advisors' team at ASIC, to give evidence to the hearing on the basis he had prepared the reports upon which ASIC relied in making the Banning Order.[21]
7. Mr Dawson was comprehensively cross-examined over 2 full hearing days and made numerous concessions, appropriately, in respect to the allegations against Mr Smith.
8. In preparing his reports, Mr Dawson had conducted a 'desk review' of the client files subject to ASIC's allegations that Mr Smith had breached his duties under the Corporations Act.
9. Insofar as being an expert witness, Mr Dawson was credible and fully answered questions asked of him and appropriately conceded matters when evidence was put to him that no longer supported some of the conclusions contained in his reports that Mr Smith had breached the Corporations Act.
10. Ms McInnes, a financial planner, was called by Mr Smith as both an expert witness, and witness of fact in her role auditing Mr Smith's client files after the making of the Banning Order. Ms McInnes has extensive experience as a financial planner and was compelling in her evidence as an expert and a witness of fact.
11. Insofar as there was any inconsistency between the expert evidence of Mr Dawson and Ms McInnes, the Tribunal prefers that of Ms McInnes because her depth of experience in financial planning was significantly greater than that of Mr Dawson. Also, Mr Dawson took a view that certain conduct, such as a provider recommending a client hold more than one superannuation fund, pay insurance premiums and advice fees from superannuation[22] was not in accordance with the 'best interests' of clients from a policy perspective.
12. Ms McInnes had a more nuanced view that none of that conduct was prohibited by the Corporations Act and regard had to be given to the relevant circumstances of a client when advising on such recommendations.
13. The Tribunal preferred Ms McInnes's evidence in this regard.
14. Mr Smith also gave evidence and was subject to cross-examination. The Tribunal considered Mr Smith to a credible witness who made appropriate concessions in cross-examination and frankly dealt with his accepted historical shortcomings in record keeping.
15. Each of the client witnesses confirmed the content of their written statements and were subject to limited cross-examination by ASIC. The Tribunal considered all of them as credible and reliable witnesses.

1. Mr and Mrs M (the Ms) received from Mr Smith a SoA, dated 3 June 2014 (the M SoA). The M SoA recommended that they:[23]

(a) Retain their existing superannuation funds (reasons listed are risk and return, quality and costs). > > (b) Replace their existing term life insurance policies held with Colonial First State (CFS) in the amount of $954,849 for Mr M and $953,621 for Mrs M with policies to be held with AIA of $1,000,000 each because 'Premium cheaper at 1 Million'. > > (c) Replace their existing term total permanently disabled (TPD) insurance policies held with CFS in the amount of $954,849 for Mr M and $953,621 for Mrs M with policies to be held with AIA of $1,000,000 each because 'Premium cheaper at 1 Million'. > > (d) Establish trauma insurance policies with AIA for each of them in the amount of $50,000 (that amount based on the Ms' nomination of that level of cover). > > (e) Replace Mr M's income protection insurance with CFS ('stepped policy' with $40,488 per annum cover with an annual premium of $2,461) to AIA income protection insurance ('level' policy with $100,000 per annum cover with an annual premium of $3,685). > > (f) Establish income protection insurance for Mrs M with AIA (level policy with $19,800 per annum cover with an annual premium of $995).

2. The Ms gave Mr Smith authority to proceed with the recommendations in the M SoA, excepting the recommendation to obtain trauma insurance policies.[24]
3. On 23 July 2014, AIA declined Mr M's application for TPD and income protection for medical history reasons.[25] In the same document, Mr M's application for life insurance was accepted subject to a 75% premium loading.
4. Mrs M's application for life, TPD and income protection insurances were accepted on 14 August 2014.[26] Her previous life and TPD insurance policies with CFS were cancelled on 19 August 2014.[27]
5. ASIC contends that Mr Smith, by the provision of the M SoA, he was in breach of:

(a) s 961B(1) of the Corporations Act because Mr Smith:[28] > > > (i) failed to adequately identify client objectives; > > > > (ii) did not sufficiently identify the M's financial situation; > > > > (iii) did not complete an insurance needs analysis; > > > > (iv) did not consider the impact of insurance premiums on superannuation; > > > > (v) did not consider existing superannuation; > > > > (vi) did not consider relevant health status; > > > > (vii) did not investigate existing policies; and > > > > (viii) did not assess the M's risk profile. > > (b) s 961G of the Corporations Act because:[29] > > > (i) Mr Smith's advice to Mr M to apply for TPD and income protection insurance was inappropriate as such application was declined in circumstances that Mr Smith was in breach of s 961B by not properly identifying and investigating Mr M's health circumstances. > > > > (ii) Mr Smith's advice that recommended that Mrs M's insurance premiums be deducted from her superannuation account because the premiums consumed the entire employment contribution and almost all of the investment growth and because Mr Smith was in breach of s 961B by not properly identifying the impact of insurance premiums upon Mrs M's superannuation balance. > > > > (iii) The asset allocation in the M SoA was based on an aggressive risk profile in circumstances where the Ms had been previously identified as having a growth risk profile and as such it was inappropriate to advise the Ms to continue to invest their superannuation with an aggressive risk profile. > > (c) s 961J of the Corporations Act because: > > > (i) There is a conflict between the interests of a financial adviser and a client where there is a commission payable to the adviser if the client acts on the advice, citing Downes J in ASIC v Ultiqa Lifestyle Promotions Ltd (in liq) [2022] FCA 561 (Ultiqa) at [87], [90]. > > > > (ii) If the Ms acted on the M SoA, Mr Smith would benefit by an upfront commission of $7,591 and ongoing commission of $1,855. > > > > (iii) In the circumstances, Mr Smith knew, or ought to have known, that there was such a conflict between the interests of the Ms and his own interests. > > > > (iv) Mr Smith was in breach of s 961B and s 961G and as such it is open to the Tribunal to also find that Mr Smith preferred his own interests over those of the Ms, in contravention of s 961J.

Mr Smith failed to adequately identify client objectives

1. An overarching complaint by ASIC of Mr Smith was that prior to 20 October 2016:[30]

Strictly, section 961B does not state that a financial advice provider must record the process taken to comply with the obligation to act in the best interests of the client. However, as a practical matter, it renders the best interests obligation a nonsense for the advice provider to simply state that the process was carried out in his or her head. In those circumstances, significant doubt may arise as to whether the process of the advice provider has sufficiently identified relevant circumstances and carried out necessary investigations in order to meet the obligation under section 961B(1).

1. ASIC contended that the objectives recorded by Mr Smith in a fact finding dated 13 May 2014 as 'review existing insurance and consider income protection for [Mrs M]'[31] and the further objective in the M SoA of 'Consider Trauma/Crisis cover' were 'not specific, measurable and did not determine why the insurance was required'[32].
2. Reliance for this contention was placed on the evidence of:

(a) Mr Dawson defining the client's objectives as the starting point of the advice process and this was not focussed on a financial product but those objectives.[33] Mr Dawson stated that when reviewing insurance, the adviser needs to understand why they want to review that insurance.[34] > > (b) Ms McInnes that understanding the objectives of the client was 'absolutely' important because the adviser needs to understand what the client wants and needs so as to form the basis of the advice.[35]

3. Mr Dawson conceded in cross-examination that he accepted if the Ms had defined their objectives as limited to reviewing existing insurances, consider income protection for Mrs M and consider trauma insurance, then Mr Smith did properly define their objectives.[36]
4. ASIC pressed in closing that the objectives were not adequate as they were 'not specific, measurable and did not determine why the insurance was required'.[37] Mr Dawson in re-examination said the source of the phrase 'specific and measurable' came from the ASIC regulatory guide (RG175[38]) and said:[39]

If you are unable to identify exactly what the client is coming to ask you or achieve in terms of the goal, if that's - it's the premise of the (indistinct). It's the starting point. If you get that wrong, it is likely that the advice would be misdirected or inappropriate or incorrect. So it is the most important part of the advice process and needs to be done properly.

(a) ASIC's language of Mr Smith's alleged breaches of s 961B(1) does not 'map onto the statutory language of s 961B(1), nor the "safe harbour" steps in s 961B(2)'. > > (b) There was no statutory obligation at the time of the M SoA for Mr Smith to keep records in respect of advising clients and that Mr Smith in providing advice did the intellectual exercise 'in his head' and did not reduce that necessarily to a document. > > (c) The changes to the Corporations Act requiring record keeping from 20 October 2016:

are immaterial to the allegations of past breaches of the law, and in relation to any risk of future breaches of the law, ASIC have not sought to make a case that Mr Smith' past lawful conduct now precipitates a risk that he will be non-compliant in light of the changes to the law.

(d) The statutory requirement in s 961B(2)(a) was to identify the objectives of the client:

that were disclosed to the provider by the client through instructions.

(e) ASIC was obliged to prove that the M's had provided in their instructions some objective to Mr Smith that was not included in the M SoA. ASIC cannot prove that fact.

(f) Nothing in Mr M's evidence at the hearing, including cross-examination by ASIC:

indicated that Mr Smith as the provider failed in his duty under s 961B(1) at all, let alone failed to identify [Mr M's] objectives.

(g) The allegation is:

unintelligible as an allegation of a contravention of s 961B(1), and ... by reference to s 961B(2)(a) - ASIC have not identified anything that Mr (or Mrs) [M] had as objectives that was not identified.

1. It is fair to say that the paucity of Mr Smith's record keeping, a matter he accepts, regardless of there being no statutory obligation prior to 20 October 2016, has landed him in these proceedings for precisely the reasons ASIC contends, namely that it has raised doubt that Mr Smith has met his best interests duty to his clients.
2. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the identification of objectives in the M SoA because:

(a) The requirements of s 961B(2) are procedural[41] and not qualitative. > > (b) The Tribunal accepts that for a provider to rely on the 'safe harbour' of s 961B(2) to meet the duty in s 961B(1), that a proper consideration is compliance with the relevant ASIC regulatory guide. > > (c) There was no statutory obligation at the time of the M SoA for Mr Smith to keep records in respect of his provision of personal financial advice. The lack of record keeping requires that further evidence is necessary to determine whether Mr Smith has met his duty to act in the best interests of the Ms. > > (d) The Tribunal does not accept that to meet the best interests of the client in s 961B(1) the provider is obliged to provide objectives that are specific, measurable and why the insurance was required because such an obligation is inconsistent with the clear language in s 961B(2)(a). > > (e) The undisputed evidence before the Tribunal was that the objectives as stated in the M SoA accorded to the instructions provided by the Ms and they were not asking Mr Smith to go beyond them. > > (f) The objectives in the M SoA identified the objectives that were disclosed to Mr Smith in the Ms' instructions to him.

Mr Smith did not sufficiently identify the Ms' financial situation

1. ASIC concedes the M SoA included the Ms' assets, liabilities and income, but did not include their expenses.
2. ASIC contends the failure to include expenses results in Mr Smith being 'unable to determine the [Ms'] cash flow position and therefore whether the premiums for the trauma policies could be afforded'[42], thereby breaching his duty to act in the best interests of the Ms.
3. Mr Smith contends that:[43]

(a) ASIC's language of Mr Smith's alleged breaches of s 961B(1) does not follow the statutory language of s 961B(1), nor s 961B(2). > > (b) The statutory requirement in s 961B(2)(a) was to identify the financial situation of the client 'that were disclosed to the provider by the client through instructions'. > > (c) ASIC 'does not identify anything that has been disclosed to the provider the by the client through instructions, in relation to the client's financial situation, which the provider has not identified (or recorded)'. > > (d) The scope of s 961B(2)(c) that provides 'where it was reasonably apparent that information relating to the client's relevant circumstances was incomplete or inaccurate, made reasonable inquiries to obtain complete and accurate information' read with the definition of 'the client's relevant circumstances' (s 961B(2)(b)(ii)) are words of limitation - and it is contended that 'the provider does not have any free ranging duty to inquire, but only to the extent of the advice sought on a topic'.

4. The Tribunal does not accept Mr Smith's contention that in a provider determining the 'client's relevant circumstances' that they do not have 'a free ranging duty to inquire, but only to the extent of the advice sought on a topic'.
5. The Tribunal construes that the statutory duty to inquire to the 'client's relevant circumstances' obliges the provider to consider the 'subject matter of the advice that has been sought' (s 961B(2)(b)(i)), and 'the client's objectives, financial situation and needs of the client' reasonably relevant to the advice sought (the Client Circumstances Duty).
6. Where it is reasonably apparent the provider does not have the necessary information to satisfy the Client Circumstances Duty, then the provider is obliged to make reasonable inquiries to obtain the necessary information to meet that duty (s 961B(2)(c)).
7. However, the Tribunal says what are 'reasonable inquires' to obtain the information to satisfy the Clients Circumstance Duty are to be assessed on the facts before the Tribunal and not on the assumption of an absolute duty to not provide the advice sought where the client, on an informed basis, does not provide that information.[44]
8. Undoubtedly there is risk for a provider in providing advice without all of a client's relevant circumstances (cannot rely on safe harbour of s 961B(2)), but such advice does not,, as a matter of course, constitute a breach of duty to act in the client's best interests.[45]
9. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the Ms' statement of their financial situation in the M SoA because:

(a) As found above, the requirements of s 961B(2) are procedural and not qualitative. > > (b) As found above, there was no statutory obligation at the time of the M SoA for Mr Smith to keep records in respect of his provision of personal financial advice. The lack of record keeping requires that further evidence is necessary to determine whether Mr Smith has met his duty to act in the best interests of the Ms. > > (c) Mr Smith's written evidence was that he did not include details of the Ms expenses when he completed the fact finding and he was instructed by the Ms to provide quotes on insurance costs for them to assess the costs and their capacity to meet them. Mr Smith states the Ms 'specifically did not wish to complete updated budget information and I complied with their instructions'[46]. > > (d) Mr M in his written statement states:[47]

We never used to talk to Brad about our financial position, because he was not giving us financial advice. Brad only dealt with our superannuation. Details about our daily budget was never his job.

...

When I had an accident, I became self-employed, that is when I told Brad that I wanted income protection, but I wanted the cost of that to come out of my superannuation. I did not want to get billed to get the coverage. I knew that money would be coming out of my superannuation to pay for the extra cover.

Because I had a work accident, changing insurance there was an issue for me. We looked at a few options, one came back with the premium set really high, the other one Brad recommended he told me that they would not touch me, so on Brad's recommendation I stayed where I was in terms of insurance cover.

I remembered speaking with Brad about an agreed value policy versus an indemnity policy. As I did not want to pay more for insurance, we decided on an indemnity policy.

(e) ASIC did not cross-examine Mr M as to whether he had provided Mr Smith instructions on their expenses.

(f) The undisputed evidence before the Tribunal that the Ms did not, or want to, provide instructions to Mr Smith in respect to their expenses, and further that any recommended insurance premiums were to be paid from superannuation and not funded from their income.

(g) The Tribunal is reasonably satisfied that Mr Smith cannot rely on the safe harbour of s 961B(2).

(h) The Tribunal is reasonably satisfied Mr Smith met his Clients Circumstances Duty because the Ms expressly limited the information available to Mr Smith to prepare the M SoA in an informed way.

Mr Smith did not complete an insurance needs analysis

1. ASIC contends that Mr Smith breached his duty to the Ms by not conducting an 'insurance needs analysis' when providing the M SoA because by not doing so, Mr Smith was not considering the Ms' 'relevant circumstances' in identifying what the Ms 'wanted to protect and what assets and other policies were in place which could be used to reduce insurance costs'.[48]
2. Mr Dawson answered in cross-examination to the question 'what is an insurance needs exactly?' as follows:[49]

So you look at - usually it's tied back to goals and objectives. And say for example let's make it really simple: income protection, right. You would just need to know how much the person's earning, right. Now, if you've going to do an insurance needs analysis for life cover or total permanent disability cover, you would go through and have a look at what are you actually covering for. What - you know, if this insurable event happens, does it mean you got a loan, did you need to pay this loan out, are there dependents. You know, if you're not here, then how are the people that are still here, how are you going to be able to support them. Or if you're totally and permanently disabled, how are you going to support yourself. And so it's understanding what that number potentially looks like, and then, you know, substantiate to the client, 'Look, I've thought about this. You're concerned about' - you know, 'If you're not here, you've got kids, you've got a loan, you want to leave something behind. This is where that number's come from'. And this is why I recommend that you would insure for, you know, $500,000 of life cover.

1. Mr Dawson agreed that the exercise to conduct the insurance needs analysis could be done by an oral conversation and where amenable to a 'simple answer' an amount of insurance cover could be determined and that amount put into the SoA.[50] Mr Dawson maintained that the insurance needs analysis required to be documented in the 'fact finding' and included in the SoA[51].
2. Mr Smith contended that the Ms determined their insurance needs on the basis 'that their current insurance was sufficient but they wanted to see if it could be obtained more cheaply'.[52]
3. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the requirement to provide the Ms an 'insurance needs analysis' because:

(a) As found above, the requirements of s 961B(2) are procedural and not qualitative. > > (b) As found above, there was no statutory obligation at the time of the M SoA for Mr Smith to keep records in respect of his provision of personal financial advice. The lack of record keeping requires that further evidence is necessary to determine whether Mr Smith has met his duty to act in the best interests of the Ms. > > (c) As discussed above, the Tribunal is reasonably satisfied that Mr Smith cannot rely on the safe harbour of s 961B(2). > > (d) ASIC did not cross-examine Mr M as to the instructions he had provided Mr Smith on their insurance requirements. > > (e) The undisputed evidence was that it was the Ms who determined the level of insurance they required and that they were satisfied their current level was adequate but would consider a proposal that the same level of cover 'can be done better or cheaper'.[53] > > (f) The Tribunal is reasonably satisfied Mr Smith met his duty because the Ms expressly limited the scope of the advice to Mr Smith to prepare the M SoA in an informed way and there is nothing in the evidence, inferred or otherwise, that the levels of insurance cover were not in the best interests of the clients.

Mr Smith did not consider the impact of insurance premiums on superannuation

1. ASIC contends that Mr Smith failed in his duty in considering the impact of insurance premiums on the Ms' superannuation because he did not: [54]

undertake a projection of the impact of premiums on the clients' superannuation balances and has further stated that he certainly would undertake such a projection if giving advice to clients now'.

So what I would suggest is sometimes it's important to actually consider how much impact insurance would have on balance or time in savings and then put back to the client to say, 'Yes, we're putting it in your super, but this is the impact on your super fund'.

1. ASIC contended that 'the impact on Mrs M's superannuation balance was notable'[56].
2. Mr Smith contended that the M SoA provided the annual premiums that applied to the recommended insurance policies and 'even a modestly intelligent person can work out the impact of premiums on their superannuation balance'.[57] Further, it was contended that nothing in s 961B required projections to quantify the reduction in superannuation.
3. The Tribunal asked Ms McInnes, as a financial planning expert, whether it was a breach of the best interest duty in s 961B for an advisor to recommend insurance policies to be held and paid from a superannuation fund. She said no. In re-examination she agreed that was subject to the objectives and circumstances of the client.[58]
4. Mr Dawson in cross-examination accepted that it was reasonable that it was possible to be in the best interest of the Ms to 'take a substantial hit to lower super fund balance now and consequently for the future in exchange for insurance today and the peace of mind that might bring'[59].
5. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the recommendation in the M SoA that insurance premiums be paid from their superannuation accounts because:

(a) As found above, the requirements of s 961B(2) are procedural and not qualitative. > > (b) As found above, there was no statutory obligation at the time of the M SoA for Mr Smith to keep records in respect of his provision of personal financial advice. The lack of record keeping requires that further evidence is necessary to determine whether Mr Smith has met his duty to act in the best interests of the Ms. > > (c) As discussed above, the Tribunal is reasonably satisfied that Mr Smith cannot rely on the safe harbour of s 961B(2). > > (d) Mr Smith's written evidence was that he did discuss with the Ms the impact on their superannuation balances by having insurance premiums drawn from inside their superannuation accounts. Mr Smith states the Ms: [60]

looked at it from a different perspective, that the level of cover was definitely required and if not funded via their super they would not have it. This was their priority. [Mr M] had advised he had made lump sum contributions to his super which more than covered the insurance premium, whilst [Mrs M] had employer contributions being made.

(e) ASIC did not cross-examine Mr M as to whether Mr Smith had the discussion with him above.

(f) The undisputed evidence before the Tribunal that the Ms understood the effect of insurance premiums being paid from their superannuation accounts and accepted that on an informed basis.

(g) The Tribunal is reasonably satisfied Mr Smith met his duty because the Ms expressly instructed Mr Smith that they wanted any insurance premiums to be paid from their superannuation in an informed way and there is nothing in the evidence, inferred or otherwise, that such instructions were not in the best interests of the clients.

Mr Smith did not consider existing client superannuation

1. ASIC contends that Mr Smith 'did not carry out an adequate investigation to determine whether other superannuation products maybe suitable'[61]. ASIC relies on Mr Smith's evidence that he only examined their existing superannuation fund in respect of their insurance requirements.
2. Mr Smith contends a broader review of the suitability of the Ms superannuation fund was beyond the scope of the advice being sought and 'ASIC's opinion about whether the client should have sought that advice is immaterial'.[62]
3. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to him not conducting a broader review of the suitability of the Ms superannuation beyond their insurance requirements because:

(a) As found above, the requirements of s 961B(2) are procedural and not qualitative. > > (b) As found above, there was no statutory obligation at the time of the M SoA for Mr Smith to keep records in respect of his provision of personal financial advice. The lack of record keeping requires that further evidence is necessary to determine whether Mr Smith has met his duty to act in the best interests of the Ms. > > (c) As discussed above, the Tribunal is reasonably satisfied that Mr Smith cannot rely on the safe harbour of s 961B(2). > > (d) Mr Smith's written evidence was that: [63]

The Ms asked me to examine their current product to determine whether or not the insurance coverage they wanted could be funded by their current superannuation.

I had in my mind the knowledge of current superannuation funds available in the market and in doing so that I knew their superannuation was appropriate and there was no need for me to revisit the super fund.

(e) ASIC did not cross-examine Mr M in respect to the above.

(f) The undisputed evidence before the Tribunal that the Ms did not ask Mr Smith to conduct a broader review of their superannuation fund, rather to specifically review for suitability for insurance purposes and Mr Smith did that as well as conducting a mental exercise in satisfying himself that their existing superannuation fund was appropriate.

(g) The Tribunal is reasonably satisfied Mr Smith met his duty because the Ms expressly instructed Mr Smith to limit his scope of advice to insurance in an informed way and there is nothing in the evidence, inferred or otherwise, that such instructions were not in the best interests of the clients.

Mr Smith did not consider relevant health status of clients

1. ASIC contends that in a provider identifying the client's health 'relevant circumstances, carry out an assessment of those circumstances' and then providing advice, that 'process necessarily occurs before the advice is given'.
2. ASIC says the breach is because Mr Smith's:[64]

process was to give the advice and then allow the insurance provider to seek and assess the relevant health circumstances during the insurance application process. That is, after the advice has been provided and while the recommendation are being implemented.

the appropriate course in these circumstances was for the Applicant to carry out a pre-assessment with the underwriter which would then inform the provision of the financial advice and avoid the risk of switching to an inferior policy or affecting the future ability to claim.

(a) Mr Smith gave evidence that insurers and their underwriters have their own approach to health issues, and thus an efficient approach is to make the application for the financial product and let the insurer/underwriter trigger their health assessment process, and see what 'comes back', deal with it at that stage; and > > (b) In substance, there is no relevant difference identified by ASIC as between these two approaches. There is a faint suggestion in CS [58] that a person might somehow end up with an inferior policy, although that it is not said how this might come about. Overall ASIC's position is that Mr Smith's practice was not what ASIC considers optimal, but ASOC does not identify how Mr Smith's practice contravenes the law.

2. ASIC's contention about the relevant health status of clients and how to approach an application to an insurer seems to the Tribunal to be a distinction without a difference.
3. The critical duty to act in the client's best interests is to advise the client about how to achieve the objectives they have provided. How an insurer/underwriter approaches the acceptance of risk of any individual applicant is outside the control of the provider.
4. A health pre-assessment might flag concerns or potential risks for the non-acceptance of an application, but the Tribunal does not accept that it is a binary approach to the process of applying for insurance, and certainly not one in the present circumstances that would amount to a breach of the duty to act in the clients' best interests.
5. Put another way, it would be imprudent for a provider, having conducted a health pre- assessment and considering that there is risk in whether an insurer/underwriter would accept that state of health circumstances, to not proceed to engage with an insurer/underwriter, as the provider could not with any degree of certainty determine what the insurer/underwriter might consider acceptable risk from time to time.
6. There is no suggestion, or inference, that Mr M, by going through the application process, albeit unsuccessfully, he was ever not without his existing insurance, or there was a negative consequence of his application.
7. In fact, Mrs M's existing policy was only cancelled after acceptance by the insurer for the new policy. That approach seems to the Tribunal to be the correct one.
8. The Tribunal is reasonably satisfied that Mr Smith did not breach s 961B by the way he advised the Ms to apply for insurance as contained in the M SoA.

Mr Smith did not investigate existing client policies

1. ASIC contends[67] that, whilst Mr Smith did a like for like comparison 'in his head', of the Ms' existing insurance policies and the ones recommended in the M SoA, and the M SoA provides some comparison, but Mr Smith, according to Ms McInnes was required to make:[68]

a comparison between not only the fees, but also the features and benefits of those two products. This needed to be done as a "like for like comparison" to ensure that the adviser was "comparing apples to apples, as opposed to apples and pears.

1. Mr Dawson's evidence was on all fours to that of Ms McInnes and was required for the client to make an informed decision about the advice.
2. ASIC contends that the Tribunal should not be satisfied that Mr Smith's comparison 'in his head' was sufficient to meet his duty under s 961B(1).
3. Mr Smith contends that:[69]

(a) Mr Smith did do a comparison but did not reduce all of that comparison to writing. > > (b) ASIC does not suggest that Mr Smith is lying and the Tribunal should be satisfied that 'Mr Smith's mental exercise of comparison is sufficient to meet s 961B(1)'. > > (c) 'Mr Smith does not have a duty to satisfy ASIC, or the Tribunal, of anything. It is for ASIC to satisfy the Tribunal that Mr Smith did not compare the Ms existing products with the recommended new products'. > > (d) ASIC acknowledges that Mr Smith did set out a comparison in the M SoA and he 'obviously "investigated" the existing policy to this extent. There is no reason to doubt Mr Smith's evidence that he otherwise held a general fund of knowledge about products in the market and drew on this in giving his advice to the [Ms]. It is notable that Ms McInnes opines that Mr Smith is knowledgeable about such matters'.

4. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty under s 961B(1) in investigating the Ms' existing client policies because:

(a) as found above, the requirements of s 961B(2) are procedural and not qualitative; > > (b) as found above, there was no statutory obligation at the time of the M SoA for Mr Smith to keep records in respect of his provision of personal financial advice. The lack of record keeping requires that further evidence is necessary to determine whether Mr Smith has met his duty to act in the best interests of the Ms; > > (c) the Tribunal is reasonably satisfied that Mr Smith cannot rely on the safe harbour of s 961B(2) where he did not reduce to writing in the M SoA a full comparison of the insurance products. > > (d) the Tribunal finds as a fact that Mr Smith: > > > (i) had knowledge of the products, he was advising on in the M SoA. That finding is consistent with the unchallenged evidence of Mr Smith and Ms McInnes's opinion; > > > > (ii) did a comparison 'in his head' of the products he was advising on in the M SoA; and > > > > (iii) reduced some of the mental comparison he did into writing in the M SoA. > > (e) The Tribunal is reasonably satisfied Mr Smith met his duty because there is no evidence, or any inference, that the comparison that is contained in the M SoA is wrong or missing particular details that, if included, would have shown that the Ms would have been better informed of any difference between the insurance policies.

1. ASIC contends that Mr Smith did not properly assess the Ms' risk profile because:[70]

(a) The M SoA records the risk profile of the Ms as 'Aggressive' and consistent with that profile 'recommends an asset allocation of 3.41% of defensive assets and 96.59% in growth assets'. > > (b) Mr Smith's evidence was that the risk profile in the M SoA was derived from a 2008 SoA[71] (2008 SoA). > > (c) The 2008 SoA states 'I have established your approach to investing (that is, risk profile) as Growth' and provides the appropriate strategy for that risk profile is 20% income assets and 80% growth assets.[72] > > (d) Mr Dawson's evidence was that Mr Smith 'ought to have undertaken a new risk profile assessment which documents and clearly confirms the clients risk tolerance before making investment recommendations'.[73] > > (e) As that did not occur in the M SoA, the recommendations were inconsistent with the risk profile in the 2008 SoA.

(a) 'It is unclear what the actual concern is'. > > (b) 'The M SoA sets out a recommended allocation of assets as between the various investment classes - Cash, Australian Equities, International Equities, Property Securities. "Defensive Assets" must be a reference only to cash, whereas "Growth Assets" must be a reference to the remaining categories'. > > (c) Mr Smith's evidence was that the allocation was not within his control as it was the product provider's allocation. > > (d) Mr Smith was not advising on the Ms' superannuation choices and only whether it was compatible with the insurance recommendations.

3. Mr Smith stated that the 2008 SoA 'provided for an aggressive risk profile and there was no alteration in instructions to this profile'[75]. Mr Smith restates this evidence in his later affidavit.[76]
4. Mr Smith was cross-examined on the discrepancy between the risk profile as disclosed in the 2008 SoA of 'growth' and his evidence that it was 'aggressive' as documented in the M SoA. When taken to the 2008 SoA, Mr Smith agreed that it did disclose a risk profile of 'growth' but there was documentation that the Ms wanted it to be 'aggressive'.[77] Mr Smith was not asked about the Ms risk profiles in re-examination.
5. Mr M in his written statement and in oral evidence did not speak to risk profiles.
6. Mr Smith in the 2008 SoA provides what that proportional asset allocation should be for a 'growth' risk profile when determining their risk profile[78]. Later in the 2008 SoA it states 'In our discussion on Risk versus Return you indicated that you were prepared to accept a higher risk rating of Aggressive for your Superannuation portfolios. The recommended portfolio falls within the acceptable variances for that of an Aggressive investor'[79]. The proportional asset allocation for the recommended CFS superannuation fund is 4.46% cash and the remainder in shares and property.
7. The M SoA has a similar proportional asset allocation to that as provided in the 2008 SoA, that being an 'aggressive' risk profile of less defensive assets and more growth assets.
8. As found above, the Tribunal does not accept that Mr Smith was restricted in his Clients Circumstances Duty from making inquiries about the circumstances of the Ms. As such, it was reasonable and prudent for Mr Smith to have reviewed any previous SoA, fact finds and client instructions to ensure that they were consistent with the recommendations he was to make in the M SoA, and where there was a difference, he was obliged to make inquiries of the Ms.
9. The dissonance in the 2008 SoA between the assessment that the Ms had a 'growth' risk profile and later in the same document that they had an 'aggressive' risk profile was such that it is incongruous to contend that Mr Smith had no duty to confirm the clients risk profile as this is a fundamental requirement for a provider to undertake.
10. There is no evidence that the Ms understood the dissonance in risk profile contained in the 2008 SoA as then applied to the M SoA.
11. That was Mr Smith's principal obligation when acting in the best interests of the Ms. If the superannuation fund that the Ms were invested in did not align to their risk profile, which was not clear in the 2008 SoA, he was obliged to either get their informed consent to remain at a higher risk profile or provide recommendations for a superannuation fund that aligned to their accepted risk profile.
12. At the very least, the failure is a carelessness on Mr Smith's part in reviewing the 2008 SoA and applying that to his recommendations in the M SoA. Mr Smith acknowledges as much in his written evidence[80].
13. The Tribunal is reasonably satisfied that Mr Smith did breach his duty under s 961B(1) in respect to the risk profile assessment in the M SoA.

Did Mr Smith breach s 961G

1. ASIC contends that Mr Smith breached s 961G of the Corporations Act on 3 grounds as detailed above.
2. The Tribunal has found that the s 961B element of 2 of those grounds were not made out, namely:

(e) Mr Smith's advice to Mr M to apply for TPD and income protection insurance without a health pre-assessment; and > > (f) Mr Smith's advice that recommended that Mrs M's insurance premiums be deducted from her superannuation account because the impact of those premiums upon Mrs M's superannuation balance.

3. ASIC contends that the quality of the advice to Mr M in respect to Mr Smith's recommendation to apply for insurance was inappropriate because the TPD and income protection application were declined due to Mr M's medical history and the life insurance application was accepted with a 75% loading. That contention presupposes that Mr Smith did not properly identify and investigate Mr M's health circumstances and if that duty had been satisfied, it would not have been appropriate to advise Mr M to replace those existing policies.[81]
4. As found above, Mr M did not lose his existing insurance cover by his application for insurance as recommended by the M SoA.
5. The Tribunal does not accept, having found that Mr Smith did not breach s 961B(1) in regard to Mr M's insurance application, that he has breached s 961G because ASIC's contention conflates the recommendation to apply for insurance with a result that would have almost certainly been the same if a health pre-assessment had been conducted. It is not simply factual that the recommendation to apply for insurance can be sheeted home to Mr Smith in how the insurer/underwriter determined on what conditions it would or would not accept Mr M's application.
6. As found above, the Tribunal found that Mr Smith did not breach s 961B(1) in respect to the recommendation that Mrs M's insurance premiums were paid out of her superannuation fund. The Tribunal accepts that by doing so the premiums took almost all of the employer contributions and growth in the fund. But the evidence was clear, Mrs M understood that would be a consequence of her decision to fund insurance from her superannuation fund.
7. It matters not that ASIC says that it is not the purpose of superannuation to fund insurance but rather to accumulate funds for retirement.
8. There is nothing unlawful in Mr Smith's advice to use superannuation to fund insurance, this was confirmed by Ms McInnes's evidence. An informed client choosing to fund insurance from superannuation, despite the deleterious impact on the balance of that fund, does not amount to a breach of duty under s 961G.
9. Mr Smith contends that the 'final allegation proceeds on a misconception - it was not Mr Smith who set the various allocations in that table in the SOA, but the product provider, and Mr Smith was not advising them about superannuation options'.[82]
10. The Tribunal has found that Mr Smith was in breach of his duty under s 961B(1) in respect to the risk profile contained in the M SoA and its finding in that respect is at odds with Mr Smith's contention.
11. It follows that the quality of the advice in the M SoA is tainted with that breach of s 961B(1), such that the Tribunal is not satisfied the advice on the risk profile in the M SoA is reasonably appropriate to the Ms.
12. The Tribunal is reasonably satisfied that Mr Smith is in breach of s 961G in respect to his advice in the M SoA as to the Ms' risk profile.

Did Mr Smith breach s 961J

1. ASIC contends that Mr Smith has breached s 961J by reason there is a conflict between the interests of a financial adviser and a client where there is a commission payable to the adviser if the client acts on the advice.
2. ASIC relies on Ultiqa as authority to support this contention.
3. The facts of Ultiqa were in relation to a managed investment scheme where consumers were sold an interest that enabled consumers to go on holidays at various locations within Australia and overseas. Sales of an interest in the scheme was through sale agents operating under Ultiqa's AFSL. The sale agents were provided a script, training manual and a template SoA which was 'one size fits all'.
4. These sale agents would typically approach consumers at shopping centres, theme parks and other locations. Consumers were encouraged to attend a presentation on the scheme (and sign up) after being provided a 'scratch card' and if there were three matching symbols they may be entitled to a prize if they attended the presentation.
5. In Ultiqa, Downes J found:

(a) At [5], that the purpose of the material provided to the sales agents 'was to maximise the prospect of a sale of an interest in the Scheme'. > > (b) At [79], that the sales agents did not take the steps in s 961B(2) and at [81] that the sales agents 'did not comply with their obligations to act in the best interests of the pleaded consumers and thereby contravened s 961B(1)'. > > (c) At [87], 'In this case, there was a conflict between the interests of the authorised representatives and the respective consumers within the meaning of s 961J(1)(a) of the Act. That is because a commission was payable to the Ultiqa authorised representative if the consumer acted on the advice and acquired interests in the scheme'. > > (d) At [89], 'There was also a conflict of interest between the consumers and Ultiqa, which was the financial services licensee of which the authorised representative was a representative. That is because ...the authorised representatives were recommending an in-house product which had been developed internally within the Ultiqa group of companies. This conflict of interest fall within s 961J(1)(c) of the Act and each authorised representative knew or ought to have known there was such a conflict. > > (e) At [91], _'_That they gave such priority also manifested by the authorised representatives engaging in tactics to pressure the consumers to sign up at the presentation, including (in one instance) preventing the consumer from obtaining external advice, (in two instances) misleading the consumers by representing that the interest in the Scheme was not a time-share scheme, in generally not giving the consumers sufficient privacy and time to discuss and debate the proposed acquisition of interests in the Scheme, and by offering inducement to the consumers to sign up at the presentation'.

6. ASIC contends, relying on Ulitqa, Mr Smith is in breach of s 961J because a conflict arises where there is a commission payable to Mr Smith if the Ms act upon his advice.[83]
7. This is an extraordinary submission by ASIC. The payment of commissions to providers as part of giving their advice is a routine and lawful method of payment under the Corporations Act.
8. The facts in the present proceedings could not be more different to the facts in Ultiqa. There is simply no evidence in the present proceedings of the types of conduct and resulting breaches of the Corporations Act that were before Downes J.
9. This is a garden variety case of a financial planner providing advice to clients where payment for that advice is disclosed in the SoA and, not unusually, is paid as a commission from the superannuation fund. The clients, fully informed, make a decision whether to accept the advice and proceed, knowing how the provider will be paid for the advice.
10. The Tribunal gives significant weight to the evidence of Ms McInnes in this regard.
11. The Tribunal has made a finding Mr Smith breached his duty under s 961B(1) and s 961G on a single ground, such breach relating to his failure to properly address the risk profile contained in the M SoA.
12. There is no evidence, or inference, such breach resulted in Mr Smith prioritising his interests over the Ms. If anything, it is symbolic of Mr Smith's admitted inadvertence, which does not reflect well on him, when preparing documentation to advise his clients.
    1. The Tribunal is reasonably satisfied that Mr Smith did not breach s 961J in respect of the Ms for the reasons above.

1. Mr D and Mrs S (the DS) received from Mr Smith a SoA, dated 1 June 2017 (the DS SoA)[84].
2. Mrs S is a direct relative of Mr Smith. Mr Smith had 'a detailed knowledge of their personal and financial circumstances'[85].
3. The DS SoA recommended that:[86]

(a) Mr D rollover his existing superannuation into a CFS superannuation account; and > > (b) Mr D and Mrs S cancel their existing life, TPD and income protection insurance and obtain life, TPD, trauma and income protection insurance with Clearview.

4. Insurance applications for the recommended insurance policies were signed in June 2017.[87]
5. On 26 June 2017, Clearview advised Mrs S that they were unable to offer her any insurance due to her medical history.[88]
6. Mr D was offered income protection insurance by Clearview with a 25% loading, or a 90 day waiting period, because Mr D played recreational football.[89]
7. On 17 July 2017, Mr D requested that the application for income protection be withdrawn.[90]
8. On 8 August 2017, Mr D's application for life, TPD and trauma with Clearview were approved.[91]
9. ASIC contends that Mr Smith, by the provision of the DS SoA, he was in breach of:

(a) s 961B(1) because Mr Smith:[92] > > > (i) did not consider relevant health status; > > > > (ii) did not sufficiently verify Mr D's income; > > > > (iii) did not adequately consider risks of income protection held in superannuation. > > > > (iv) did not consider existing superannuation; > > > > (v) did not investigate existing policies; and > > > > (vi) did not assess the M's risk profile. > > (b) s 961G because:[93] > > > (i) Mr Smith's advice to Mrs S to replace her existing life, TPD and income protection insurance was inappropriate as such application was declined due to her medical history and thereby Mr Smith was in breach of s 961B by not properly identifying and investigating Mr M's health circumstances and it was not appropriate to advise Mrs S to replace her existing insurance policies. > > > > (ii) Mr Smith's advice that recommended an agreed value income protection policy to be held in superannuation because to obtain the benefit of the policy, Mr D would need to verify his income and Mr Smith had failed in his duty under s 961B(1) in that respect. By holding an agreed value policy (and therefore more expensive) in superannuation, the income payable could not be more than what Mr D was earning before triggering the policy and the ability to claim the full benefit and the additional cost of having the benefit was lost. > > > > (iii) The purpose of income protection is to supplement Mr D's income when he is unable to work, not to top up his superannuation. The advice was not appropriate because of the risk of not meeting that purpose. > > (c) s 961J because: > > > (i) There is a conflict between the interests of a financial adviser and a client where there is a commission payable to the adviser if the client acts on the advice.[94] > > > > (ii) In the circumstances, Mr Smith knew, or ought to have known, that there was such a conflict between the interests of the Ms and his own interests. > > > > (iii) Mr Smith was in breach of s 961B and s 961G and as such it is open to the Tribunal to also find that Mr Smith preferred his own interests over those of the Ms, in contravention of s 961J.

Mr Smith did not consider relevant health status of clients (2)

1. ASIC's contentions are like those advanced in respect of the Ms above.[95]
2. Mr Smith used the same process of having the DS' apply for insurance to determine if the insurer/underwriter would cover them.
3. The factual difference is that Mr Smith knew of an injury suffered by Mrs S but did not know whether that injury was a concern for the insurer.
4. Mr Smith's evidence was that the nature of the injury 'was not a common medical issue I confronted' and the insurer determined that a medical test was required, and once completed, the insurer was satisfied and approved the policy.[96]
5. The Tribunal is reasonably satisfied that Mr Smith did not breach s 961B(1) by the way he advised the DS to apply for insurance as contained in the DS SoA for the same reasons above in respect of the duty of Mr Smith to conduct a health pre-assessment and find out from the insurer/underwriter whether they would provide cover, before providing the advice in the DS SoA.

Mr Smith did not sufficiently verify Mr D's income

1. ASIC contends Mr D's income disclosed in the DS SoA is inconsistent with the amount in the application to the insurer ($44,500) to that disclosed in the fact find, Mr D's 2016 tax return and Mr D's 2017 fortnightly payslips.[97] The discrepancies in the income run from $36,000 in the D SoA to as much as $65,000 in the payslips.
2. The evidence of Mr Smith that it was a '_tricky matte_r' to determine Mr D's income[98] due to a delay in clarifying Mr D's income by his accountant.
3. ASIC contends that Mr Smith breached his duty in s 961B(1) because he did not determine Mr D's income prior to providing the DS SoA, stating:[99]

In this case, the Applicant proceeded to the financial advice to [Mr D] concerning income protection insurance in circumstances where he had not yet determined a central item of information required to give that advice.

There is an intrigue in relation to Mr [D's] income, although it appears to be [Mr D's] own creation. Mr Smith's evidence was that the income of $36,000 was used for [Mr D] as that would avoid having to reveal to an insurer that [Mr D] had a declining income, and also, that income of $36,000 per year was an adequate statement of [Mr D's] income for IP insurance that was sought.

This appears to have involved a "work around" to help [Mr D] navigate the issue of his declining income. Far from a breach of s 961B(1), it placed [Mr D] in the best possible position to secure insurance.

The fact find disclosed [Mr D'] income as $54,000 - this was based on information received from [Mr D] at the time. i.e his estimation of his gross income.

The 2016 tax return and financial year payment summary disclosed a gross income of $54,801.70 and $54,738.71 - income protection is determined on taxable income of $35,959;

The 2017 fortnightly payslips indicate earnings of approximately $65,000 per annum - income protection is determined on Taxable income of $28,651;

Mr D's income was captured as $36,000 in the SOA - this was the figure that was calculated that the insurer would accept for income protection.

Mr D's income was stated as $44,500 in the insurance application - this is incorrect, the implemented Clearview application clearly stated $36,000.[102]

1. Mr Smith states that the discrepancies as to the amounts are related to gross income contrasted with assessable income and in Mr D's circumstances, he had a declining income the insurer 'offered cover for the most recent taxable income of $36,000'[103].
2. The lack of certainty about Mr D's income at the time of the DS SoA resulted in approximately 6 months delay between the application for the existing life, TPD and income protection insurance and the new policy as recommended commencing.[104]
3. Mr Smith gave evidence that the existing policies were not cancelled until confirmation that all of the new policies had been accepted.[105]
4. As the Tribunal found above, the Client Circumstances Duty required Mr Smith, where Mr D's instructions on his income were unclear, a statutory duty to make reasonable inquiries to obtain the necessary information.
5. The Tribunal notes that Mr Smith took risk in providing advice without all of a client's relevant circumstances (cannot rely on safe harbour of s 961B(2)), but such advice does not as a matter of course constitute a breach of duty to act in the client's best interests.[106]
6. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to his duty to make reasonable inquiries about Mr D's income because:

(a) as found above, the requirements of s 961B(2) are procedural and not qualitative; > > (b) the Tribunal is reasonably satisfied that Mr Smith cannot rely on the safe harbour of s 961B(2); > > (c) Mr Smith took steps to ensure that Mr D's best interests were protected by not cancelling his existing insurance policies until the new policies were accepted by the insurer; and > > (d) the Tribunal is reasonably satisfied Mr Smith met his Clients Circumstances Duty because Mr Smith made reasonable inquiries to determine Mr D's income and the application for income protection insurance is consistent with those inquiries and as disclosed in the DS SoA.

Mr Smith did not adequately consider risks of income protection held in superannuation

1. ASIC contends that Mr Smith did not adequately consider the risks of an agreed value income protection insurance policy being held within Mr D's superannuation fund because Mr D would pay a higher premium for a policy that if claimed the amount paid 'cannot be more than the member was earning before they stopped work' and any amount unable to be paid 'would be retained within the member's superannuation'.[107]
2. Mr Dawson's evidence was that Mr Dawson did not adequately consider the circumstances of the DS' and 'particularly so given the advice is based on Mr D's income being $36,000, which was close to the minimum wage or pension amount in 2017.[108]
3. Mr Smith contended that it was,

correct that there is a risk that some portion of an agreed value IP policy will be "trapped" in superannuation if it is called upon (since superannuation rules allow for the release of a maximum of 75% of pre-injury earnings), it is not certain that such money will be so trapped - there is every chance that it will be able to be paid out entirely.[109]

I do not fully understand the allegation at [48(d)]. I do not understand what ASIC means by "condition of release". I do know I recommended the product because the policy wording was better, more generous and easier to apply. That is, the product I recommended has a generally different wording making it more advantageous come claim time. It provides an agreed value, within the superannuation rules. Any amount unable to be released due to these rules, will be retained within superannuation, which is still beneficial as discussed and explained to the clients.

1. Mr Smith was not cross-examined on this point.
2. Mr D provided a written statement but was not required by ASIC for cross-examination. Due to his familial relationship with Mr Smith, he was getting advice informally and then requested formal advice, he did not recall specifics but remembered talking 'about the details and options available' to him and Mrs S.[111]
3. The DS SoA details the 'benefits' of income protection being held within superannuation and also the 'risks'.[112] It also recommends a 'level' premium structure (agreed value) because:[113]

Under a "level premium" structure premiums are generally the same every year for the same level of cover. Usually a level premium will be higher than stepped premiums in the early years of a policy but over the long-term will be cheaper.

1. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the recommendation in the DS SoA that the income protection insurance be an agreed value because:

(a) as found above, the requirements of s 961B(2) are procedural and not qualitative; and > > (b) Mr Smith did, in a minimum way, meet the procedural requirements of identifying the risks and benefits of an agreed value policy held within Mr D's superannuation.

Did Mr Smith breach s 961G (2)

1. ASIC contends that Mr Smith breached s 961G of the Corporations Act on 3 grounds as detailed above.
2. The Tribunal has found that the s 961B element of 2 of those grounds were not made out, namely:

(a) Mr Smith's advice to Mrs S to apply for life, TPD and income protection insurance without a health pre-assessment; and > > (b) Mr Smith's advice that recommended that Mr D's income protection insurance be an agreed value policy held within his superannuation.

3. ASIC contends that the quality of the advice to Mrs S in respect to Mr Smith's recommendation to apply for insurance was inappropriate because the life, TPD and income protection application were declined due to Mrs S's medical history.[114] That contention presupposes that Mr Smith did not properly identify and investigate Mrs S's health circumstances and if that duty had been satisfied, it would not have been appropriate to advise Mrs S to replace those existing policies.[115]
4. As found above, Mrs S did not lose her existing insurance cover by her application for insurance as recommended by the DS SoA.
5. The Tribunal does not accept, having found that Mr Smith did not breach s 961B(1) in regard to Mrs S's insurance application, that he has breached s 961G because as found previously, ASIC's contention conflates the recommendation to apply for insurance with a result that would have almost certainly been the same if a health pre-assessment had been conducted.
6. It is not simply factual that the recommendation to apply for insurance can be sheeted home to Mr Smith in how the insurer/underwriter determined on what conditions it would or would not accept Mrs S's application.
7. In any event, contrary to ASIC's contention, after Mrs S submitted to a medical test, the insurer accepted her application.[116]
8. As found above, the Tribunal found that Mr Smith did not breach s 961B(1) in respect to the recommendation that Mr D's income protection insurance be an agreed value policy held within his superannuation.
9. There is nothing unlawful in Mr Smith's recommendation.
10. As to whether the recommendation was inappropriate because of the risk of the agreed value policy not meeting the purpose of income protection if not all of it could be accessed, the Tribunal is not satisfied that it was an inappropriate recommendation because the evidence was not unequivocal about that effect. The risks and benefits of an agreed value policy were adequately explained in the DS SoA.
11. The Tribunal is reasonably satisfied that Mr Smith is not in breach of s 961G in respect to his advice in the DS SoA.

Did Mr Smith breach s 961J (2)

1. ASIC again contends that Mr Smith has breached s 961J by reason there is a conflict between the interests of a financial adviser and a client where there is a commission payable to the adviser if the client acts on the advice.[117]
   1. The Tribunal has provided its reasons above for why it is not satisfied that contention is reasonably available on the circumstances of Mr Smith and is reasonably satisfied that Mr Smith did not breach s 961J in respect of the DSs' for those reasons.

1. Mr Smith provided Mr T a SoA, dated 9 September 2013 (the T SoA)[118]. The T SoA recommended that Mr T:[119]

(a) Rollover certain funds from an existing superannuation account (and keep the remainder of the balance in that account) into a new CFS superannuation account. > > (b) Withdraw $52,077 from an existing managed investment fund and combine with cash funds totalling $63,000 (totalling $115,077) to invest into a First Choice Wholesale Investment managed fund.

2. ASIC contends that Mr Smith, by the provision of the DS SoA, he was in breach of s 961B(1) because Mr Smith did not investigate Mr T's existing superannuation account.[120] ASIC specifically contended that:

The fact find noted that [Mr T] wanted to consolidate his superannuation but did not have a preference for keeping any particular fund, other than his Australian Super Fund because it was a recipient of his salary sacrifice. The fact find also noted that he wanted access to direct shares in his superannuation. This forms part of the basis of the recommendation ultimately made in the SOA. However, a direct investment option was available through Australian Super which was less expensive than the CFS product ultimately recommended.[121] The Applicant has previously accepted that he did not identify that Australian Super had a direct investment option and was unaware of that option at that time[122].

1. Mr Dawson's evidence was that Mr Smith did not adequately investigate Mr T's existing superannuation fund to determine if it was suitable to consolidate the other funds and that the ability to invest in direct shares and term deposits was available through Australian Super and appeared less expensive than CFS.[123]
2. ASIC relied on the evidence of Ms McInnes as before that 'the best interest duty required a proper investigation to determine why the client should switch from an existing product to another product'.[124]
3. Mr Smith contended that Mr Smith did consider rolling over Mr T's superannuation into his existing Australian Super 'but recommended against it because Australian Super operates on a "direct investment" basis, which over time, Mr Smith considered would be preferable for Mr T'.[125]
4. Mr Smith in his evidence stated that the recommendation to establish a new superannuation fund with CFS was to 'achieve potentially higher after-fee returns than could be obtained through his existing superannuation fund' and that existing fund did not provide him with access to direct shares or term deposit investment options.[126]
5. Mr Smith in a later statement said the CFS recommendation 'encompassed a range of separate investments...is more transparent as it shows distributions separately...will allow [Mr T] to view his account in a different way...would be able to access asset growth and income separately...preferable to a direct investment fund like ASF given the current state of play in the economy...funds like ASF will need to start selling off assets to meet redemptions from retirees for their living expenses'.[127]
6. In cross-examination Mr Smith accepted that Australian Super had a capacity for direct investment in shares but disagreed that he did not know that at the time of advising Mr T.[128]
7. Mr Smith was cross-examined on the issue of the fees payable for his advice. Mr Smith's evidence was that the fee for advice was a fixed amount and was to be paid by Mr T regardless of whether that was to be paid from the recommended superannuation fund or out of pocket. Mr Smith said the advantage of it being paid out of the superannuation fund was that if paid from the superannuation fund there was a discount of approximately 20%.[129]
8. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the recommendation to open another superannuation fund in the T SoA because:

(a) as found above, the requirements of s 961B(2) are procedural[130] and not qualitative; > > (b) Mr Smith evidence that there were advantages to the recommended CFS superannuation fund in respect to Mr T, beyond the ability to make direct investment in shares, were not challenged in cross-examination of Mr Smith; > > (c) the fees payable by Mr T were for the advice provided by Mr Smith, and the mode of payment of those fees was an election by Mr T to pay out of pocket or out of superannuation; and > > (d) the Tribunal is reasonably satisfied that Mr Smith carried out an adequate investigation into Mr T's existing superannuation and the recommended CFS superannuation fund.

1. Mr Smith provided Mr P a SoA, dated 22 September 2016 (the P SoA)[131]. The P SoA recommended that Mr P:[132]

(a) rollover his existing superannuation into a FirstChoice Wholesale Personal Super account; and > > (b) obtain life, TPD and income protection insurance.

2. ASIC contends that Mr Smith, by the provision of the P SoA, he was in breach of:

(a) s 961B(1) because Mr Smith:[133] > > > (i) did not adequately identify client objectives; and > > > > (ii) did not consider existing superannuation. > > (b) s 961G because:[134] > > > (i) Mr Smith's advice that recommended an agreed value income protection policy to be held in superannuation because to obtain the benefit of the policy, Mr P would need to verify his income. By holding an agreed value policy (and therefore more expensive) in superannuation the income payable could not be more than what Mr P was earning before triggering the policy and the ability to claim the full benefit and the additional cost of having the benefit was lost. > > > > (ii) The purpose of income protection is to supplement Mr P's income when he is unable to work, not to top up his superannuation. The advice was not appropriate because of the risk of not meeting that purpose. > > (c) s 961J because: > > > (i) There is a conflict between the interests of a financial adviser and a client where there is a commission payable to the adviser if the client acts on the advice.[135] > > > > (ii) In the circumstances, Mr Smith knew, or ought to have known, that there was such a conflict between the interests of the Ms and his own interests. > > > > (iii) Mr Smith was in breach of s 961B and s 961G and as such it is open to the Tribunal to also find that Mr Smith preferred his own interests over those of the Mr P, in contravention of s 961J.

3. Mr Smith's fact find for Mr P identified objectives of 'implementing life cover, TPD cover, income protection and superannuation with reference to higher risk options'[136]
4. The T SoA identifies Mr T's objectives as 'review super - access higher risk options, review insurance to ensure comprehensive cover is in place and fund insurance via superannuation fund'.[137]
5. ASIC contends that, based on the evidence of Mr Dawson, that the objectives in the T SoA 'were not specific and measurable objectives, but rather were references to financial products' and Mr Smith was required to inquire further as to what Mr T's objective was in in respect to the financial advice.[138]
6. Reliance was again placed on the evidence of Ms McInnes that understanding the objectives of the client was 'absolutely' important because the adviser needs to understand what the client wants and needs so as to form the basis of the advice.[139]
7. ASIC relied on Mr Smith's concession that the objectives in the T SoA should have been more specific.[140]
8. Mr Smith contended that:[141]

(a) The allegation was 'unintelligible viz s 961B(1) and 961B(2)'. > > (b) Identifying objectives (s 961B(2)) 'runs only as far as they are disclosed by the client in instructions, and making further inquiries runs only as far as is reasonable to ensure there is complete and accurate information'. > > (c) 'A provider does not need to delve into the depths of a client's life as to assist them to articulate "life objectives" before the articulating "financial objectives"'. > > (d) Mr Smith correctly recorded what Mr P wanted to achieve. > > (e) Mr P wanted an aggressive risk profile to his investments. > > (f) The allegation that the comparison of superannuation funds was not on a 'like for like' basis was in circumstances where Mr P 'had already determined that he wished to switch out of his "balanced" (ie, lower yield) fund. It makes little sense to spill ink over something that is not in play'. > > (g) Because Mr P had already determined he wanted to move out of his existing superannuation fund the criticism of not providing a comparison of 'fees, features and benefits' was redundant.

9. Mr P in his written statement gave evidence that Mr Smith: [142]

(a) Explained the risks and benefits of the CFS geared superannuation fund and its performance over 20 years. Mr P decided, knowing the risk involved, to move to that fund and 'ultimately I have benefitted from the higher returns of the geared fund'. > > (b) Explained the difference between an agreed versus indemnity income protection policy, and having considered that Mr P chose an agreed value policy based on his consideration of his employment circumstances.

10. Mr P in cross-examination said he had no 'love' for Sunsuper as the employer provided superannuation fund and when he looked at the records for CFS he decided himself that he wanted to move.[143]
11. Mr P went on to say that he was 'pretty aggressive by nature' and 'I go for a greater risk' and recalled discussing this with Mr Smith.[144]
12. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the identification of objectives or consideration of existing superannuation in the T SoA because:

(a) as found above, the requirements of s 961B(2) are procedural[145] and not qualitative; > > (b) as found above, the Tribunal does not accept that to meet the best interests of the client in s 961B(1) the provider is obliged to provide objectives that are specific, measurable and why the insurance was required because such an obligation is inconsistent with the clear language in s 961B(2)(a); > > (c) the undisputed evidence before the Tribunal was that the objectives as stated in the T SoA accorded to the instructions provided by Mr T and he was not asking Mr Smith to go beyond them; > > (d) the objectives in the T SoA identified the objectives that were disclosed to Mr Smith in Mr T's instructions to him; > > (e) the Tribunal does not accept the contention of ASIC that the characterisation of the objectives was product focussed as they recorded Mr T's aggressive risk profile and his requirement to have comprehensive insurance cover; > > (f) in any event, the Tribunal does not accept that a valid objective cannot be specific to a type of insurance product (ie, life, TPD, trauma or income protection) or incorporate a risk profile, provided that is subject to consideration in the advice and the recommendations made by the provider; and > > (g) Mr P had independently made the decision that he no longer wanted to remain in his existing superannuation fund and expressed a strong preference for the recommended fund based on his consideration of its results.

13. It follows for the same reasons as above, that the allegations of breach for ss 961G and 961J are not made out.

1. Mr Smith provided Mr and Mrs B a SoA, dated 19 February 2014 (the B SoA)[146]. The B SoA recommended that:[147]

(a) Mr B withdraw $95,000 from his existing superannuation account and $46,000 from their CFS managed investment to contribute into Mrs B's Sunsuper account. > > (b) Mr B rollover the remainder of his existing superannuation into a CFS - FirstChoice Wholesale pension fund.

2. ASIC contends that Mr Smith, by the provision of the B SoA, he was in breach of s 961B(1) because Mr Smith: [148]

(a) did not adequately identify client objectives; and > > (b) did not consider existing superannuation.

Did Mr Smith adequately identify client objectives

1. Without repeating previous ASIC contentions in respect to the duty to adequately identify client objectives, the specific contention in relation to Mr and Mr B was that made by Mr Dawson that 'making savings last during retirement is not a specific and measurable objective', nor was 'having advice fees paid via a product is not an objective, but rather is a preference concerning how the product is to be paid for'.[149]
2. Mr Smith, without recounting the same contentions made in respect to the duty to adequately identify client objectives, contends that the objectives accurately reflected what Mr and Mrs B wanted Mr Smith to advise them on.[150]
3. Mr and Mrs B in their written statement said they trusted Mr Smith and although they do not recall exactly why they changed superannuation funds they would only have done so on Mr Smith's advice.[151]
4. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty under s 961B(1) in respect of adequately identifying the objectives of Mr and Mrs B because:

(a) as found above, the requirements of s 961B(2) are procedural[152] and not qualitative;

(b) as found above, the Tribunal does not accept that to meet the best interests of the client in s 961B(1) the provider is obliged to provide objectives that are specific, measurable because such an obligation is inconsistent with the clear language in s 961B(2)(a);

(c) the undisputed evidence before the Tribunal was that the objectives as stated in the B SoA accorded to the instructions provided by Mr and Mrs B and they were not asking Mr Smith to go beyond them; and

(d) the objectives in the B SoA identified the objectives that were disclosed to Mr Smith in Mr and Mrs B's instructions to him.

Did Mr Smith consider existing superannuation

1. ASIC contends as previously that Mr Smith's comparison 'in his head' and the comparison of fees was 'not a like for like' does not satisfy his duty under s 961B(1).[153] Further, a pension account was available in Mr B's existing superannuation account, and Mr Smith was required to a comparison on 'fees, features and benefits'.
2. Mr Smith contends that ASIC accepts that he did a comparison but 'did not commit that exercise to writing' and this allegation 'distils to a criticism about the adequacy of the Statement of Advice, which is not a charge made against Mr Smith'.[154]
3. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to him considering Mr and Mrs B's existing superannuation because:

(a) as found above, the requirements of s 961B(2) are procedural and not qualitative; > > (b) as found above, there was no statutory obligation at the time of the M SoA for Mr Smith to keep records in respect of his provision of personal financial advice. The lack of record keeping requires that further evidence is necessary to determine whether Mr Smith has met his duty to act in the best interests of Mr and Mrs B; > > (c) Mr Smith in cross-examination stated he did do the comparison of the existing and recommended superannuation funds and was not challenged except that the criticism was that there was not documentary evidence of that comparison;[155] > > (d) As considered above, the payment of the advice fee was at the election of Mr and Mrs B as to whether it was to be paid out of pocket or out of superannuation and there was no evidence contesting that fact; and > > (e) the Tribunal is reasonably satisfied on the evidence that Mr Smith did conduct a comparison of the existing and recommended superannuation funds and met his duty under s 961B(1).

1. Mr Smith provided Mr and Mrs C a SoA, dated 10 May 2017 (the C SoA)[156]. The C SoA recommended that:[157]

(a) Mr C retain his life and TPD cover with AMP Super and obtain additional life and TPD cover with AMP Super; > > (b) Mr C cancel his income protection insurance with AMP Super and establish a new income protection and trauma policy; > > (c) Mrs C retain her income protection insurance with Qsuper and obtain additional income protection and a trauma policy; and > > (d) Mrs C cancel and replace her existing Qsuper life and TPD cocer.

2. ASIC contends that Mr Smith, by the provision of the C SoA, he was in breach of:

(a) s 961B(1) because Mr Smith: [158] > > > (i) did not identify financial situation. > > > > (ii) did not consider the impact of insurance premiums on superannuation. > > > > (iii) did not consider existing insurance. > > (b) s 961G because: > > > (i) Mr Smith's advice was inappropriate because of the impact of insurance premiums on Mrs C's superannuation balance; and > > > > (ii) Superannuation is not a funding source for insurance premiums, rather the purpose is to provide benefits to member upon retirement. > > (c) s 961J because as Mr Smith is in breach of s 961B(1), it is open to the Tribunal to also find that Mr Smith preferred is own interests over those of Mr and Mrs C in contravention of s 961J.

Mr Smith did not sufficiently identify Mr and Mrs C's financial situation

1. ASIC contends that 'only one expense was captured in the fact find and SOA (being car loan repayments of $150 per week)', resulting in Mr Smith not having sufficient information to 'determine affordability of the recommended products' in circumstances on their objective to save for a home.[159]
2. ASIC relies on Mr Smith previously accepting that he did not list Mr and Mrs C's expenses, and a cash flow analysis should have been completed.[160]
3. Mr Smith contends that:[161]

It is strange that ASIC maintains an allegation that Mr Smith did not adequately identify [Mr and Mrs C's] financial position when...Mr Smith says - and he was not challenged about this - that [Mr and Mrs C] did not want to provide Mr Smith with that information and would determine affordability themselves.

1. As the Tribunal found above, where it is reasonably apparent the provider does not have the necessary information to satisfy the Client Circumstances Duty, then the provider is obliged to make reasonable inquiries to obtain the necessary information to meet that duty (s 961B(2)(c)).
2. Again, what are 'reasonable inquires' to satisfy the Clients Circumstance Duty is to be assessed on the facts before the Tribunal and not on the assumption of an absolute duty.
3. Mr C's written evidence was that he did not go through his expenses with Mr Smith, 'he was only asked to advise of the option available for insurance and I would then make the decision about whether to purchase it or not'.[162]
4. Mr C was not cross-examined by ASIC as to this ground.
5. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the Ms' statement of their financial situation in the C SoA because:

(a) as found above, the requirements of s 961B(2) are procedural and not qualitative; > > (b) Mr Smith's written evidence was that he did not include details of Mr and Mrs C expenses when he completed the fact finding as he was instructed by Mr and Mrs C to provide quotes on insurance costs for them to assess the costs and their capacity to meet them. Mr Smith states the Mr and Mrs C 'declined my request for them to complete a cash flow position as they felt they were in a better position to determine affordability'[163]; > > (c) ASIC did not cross-examine Mr C as to whether he had provided Mr Smith instructions on their expenses; > > (d) the undisputed evidence before the Tribunal that Mr and Mrs C did not, or want to, provide instructions to Mr Smith in respect to their expenses; > > (e) the Tribunal is reasonably satisfied that Mr Smith cannot rely on the safe harbour of s 961B(2); and > > (f) the Tribunal is reasonably satisfied Mr Smith met his Clients Circumstances Duty because Mr and Mrs C expressly limited the information available to Mr Smith to prepare the C SoA in an informed way.

Mr Smith did not consider the impact of insurance premiums on superannuation

1. ASIC contends that Mr Smith failed in his duty in considering the impact of insurance premiums on Mrs C's superannuation because he:[164]

failed to adequately consider the impact of paying insurance premiums from within superannuation. Ms C has a low balance in her superannuation account and the first year insurance premium would substantially deplete that balance.

1. Mr Smith contended that Mr Smith did consider the impact of the premiums being paid from Ms C's superannuation account.[165]
2. As found above, Mr and Mrs C wanted to determine for themselves the affordability of the insurance premiums and their existing cover was already being paid from their superannuation fund.
3. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty in s 961B(1) of the Corporations Act in respect to the recommendation in the C SoA that insurance premiums be paid from their superannuation accounts because:

(a) as found above, the requirements of s 961B(2) are procedural and not qualitative; > > (b) Mr and Mrs C's insurance premiums were already being paid out of their superannuation and insurance was a priority for them[166]. > > (c) The Tribunal accepts that Mr Smith's advice was appropriate because it did not impact on their after-tax income to be put to saving for a house. > > (d) In cross-examination of Mr C, he said that he and Mrs C knew that the premiums would be paid from their superannuation.[167] > > (e) The undisputed evidence before the Tribunal that Mr and Mrs C understood the effect of insurance premiums being paid from their superannuation accounts and accepted that on an informed basis. > > (f) The Tribunal is reasonably satisfied Mr Smith met his duty because Mr and Mrs C knew insurance premiums were being paid from their superannuation already and the advice to continue to do so was in an informed way and there is nothing in the evidence, inferred or otherwise, that such instructions were not in the best interests of the clients.

Mr Smith did not consider existing client insurance

1. ASIC contends that Mr Smith did not conduct a 'like for like' comparison of Mr and Mrs C's existing insurance 'could be amended to meet client requirements' against the recommended policies and relies on its previous submissions in this regard.[168]
2. In cross-examination, Mr Smith said that he believed that Mr C's existing policy was inferior to the recommended policy[169] and Mrs C could not amend her existing policy as it was a basic policy with no medical evidence collected at the time.[170]. Mr Smith went on to give evidence that the advantage of the recommended additional income protection policy would cover her for an extended period beyond her existing policy.[171]
3. The Tribunal is reasonably satisfied that Mr Smith did not breach his duty under s 961B(1) in investigating Mr and Mrs C's existing client policies because:

(a) as found above, the requirements of s 961B(2) are procedural and not qualitative. > > (b) The Tribunal finds as a fact that Mr Smith: > > > (i) had knowledge of the products, he was advising on in the C SoA. That finding is consistent with the unchallenged evidence of Mr Smith and Ms McInnes's opinion. > > > > (ii) did a comparison 'in his head' of the products he was advising on in the C SoA; and > > > > (iii) reduced some of the mental comparison he did into writing in the C SoA. > > (c) The Tribunal is reasonably satisfied Mr Smith met his duty because there is no evidence, or any inference, that the comparison that is contained in the C SoA is wrong or missing particular details that, if included, would have shown that the Ms would have been better informed of any difference between the insurance policies.

4. It follows for the same reasons as above, that the allegations of breach for ss 961G and 961J are not made out.

1. The Tribunal having found that Mr Smith breached his duty in s 961B(1) on one occasion and a resulting breach of his duty in s 961G, the Tribunal must consider whether a banning order is appropriate.
   1. ASIC makes issue, under s 920A(1)(f) of the Corporations Act, that:[172]

The contraventions of sections 961B, 961G and s 961J set out above demonstrate several failures by the Applicant to comply with his obligations over a period of several years. The numerous past contraventions raise the real prospect that the Applicant will contravene these provisions in the future.

1. ASIC then cites ongoing concerns with Mr Smith's processes with particulars taken from the reviews undertaken by Ms McInnes in her role as an auditor and mentor to Mr Smith.[173]
2. Mr Smith contends that the evidence of Ms McInnes in her expert report should be accepted that:[174]

5. In my opinion, Mr Smith has good product and strategy knowledge. However, he initially had some issues in documenting the information contained within the file notes, Fact Find and file into the advice document by way of objectives and scope.

6. In discussions with Mr Smith, it became apparent he knew and understood a lot about the clients. Discussions and coaching sessions were provided to assist him with transferring this information on to paper in the file. There was many hours of coaching and mentoring completed to assist Mr Smith on how he should document the clients' objectives and scope to ensure it was clear and represented what the client was looking for from the advice, post education.

7. Both audit and Prevet discussions were lengthy, (approximately 1 - 1.5 hours per meeting). This provided Mr Smith the opportunity to discuss current and potential future clients, he was open and curious in our discussions, he asked questions and listened to the responses. He stated on occasions he wanted to make sure he got this right. He has shown initiative and has contacted me to ask questions outside of these set meetings if he has a certain question or if he wants to check the appropriateness of advice documentation.

8. I believe Mr Smith has strong strategy and product knowledge as well as experience as a financial adviser. He understands that all client information needs to be documented on file and the information that reflects the steps he has taken to reach his recommendation. He knows how to review an advice document received by a Paraplanning Business and understands the research requirements. He also, now, has a Paraplanner with a strong compliance background and knowledge.

1. The objects of the Corporations Act and the ASIC Act must be considered when considering whether to exercise a discretion to make a banning order.[175]
2. In Rich v Australian Securities and Investments Commission [2004] HCA 42 (Rich) the High Court stated (at [48]) the leading authority on the reasons for disqualifying a person from managing corporations is Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 483 (Adler).
3. In Rich, the High Court at [49] sets out the 15 propositions from Adler which are relevant to the consideration of the appropriateness of a banning order.
4. ASIC in addressing the relevant propositions submitted that a ban would act as a general deterrence because:[176]

General deterrence is a key factor in determining whether to make a banning order in this matter. General deterrence is a fundamental issue in determining whether to impose a disqualification order and if so for what period. The Tribunal is bound to consider whether making a banning order would maintain public interest or confidence in the financial services industry.

1. ASIC submitted that specific deterrence:[177]

can be achieved by imposing a sufficient penalty that tells the person how the decision maker has evaluated the conduct complained of so that the person penalised will understand that a repetition of such conduct will be punished no less severely in the future.

1. ASIC accepted that Mr Smith had not been dishonest, and no evidence was proffered of any other disciplinary findings against him.[178] Further, ASIC acknowledged that a period of banning would have a substantial impact upon Mr Smith's business.
2. The Tribunal notes that these proceedings have been on foot since April 2021 and the Banning Order was stayed upon Mr Smith being subject to conditions to practice that requires him to provide a letter to each of his clients (existing and new) as follows: [179]

On 27 April 2021, I was given a banning order by ASIC, which - if upheld - will prohibit me from providing financial services for a period of eighteen (18) months.

I immediately applied to the Administrative Appeals Tribunal (AAT) to have the decision reviewed and set aside. No date for the hearing has been set.

On [date of stay order], the AAT granted me a stay of the banning decision. This allows me to continue to provide financial services to you, pending the outcome of the AAT review. One of the conditions of the stay was that I write to you, to inform you of these matters, [given that I currently provide financial services to you / given that you propose to engage me to provide financial services to you]. This allows you to ask me any questions you may have, and of course to allow you to make a decision regarding whether or not you wish to retain me as your financial adviser.

I will inform you of the outcome of the AAT review and any impact that the AAT's decision may have on my ability to continue to provide you with financial services.

1. ASIC submitted 18 months is appropriate for the purpose of acting as a general deterrent.[180]
2. Mr Smith contends, even if any contravention is established, that there it is not warranted to ban Mr Smith.[181]
3. The Tribunal is reasonably satisfied that Mr Smith should not be subject to a banning order because:

(a) the Tribunal found that Mr Smith had breached s 961B(1) on one occasion, namely the 'aggressive' risk profile contained in the M SoA, was not in the best interests of the client because it was not clear that there was informed consent to that level of risk when considering all of the evidence. The Tribunal found that the 2008 SoA did contain a reference to the clients adopting an 'aggressive' risk profile but contrasted with an assessment that they had a 'growth' risk profile in the same document; > > (b) the Tribunal found that Mr Smith's breach of s 961B(1) led to a breach of s 961G because the quality of the advice in the M SoA was tainted by that breach (the Breaches); > > (c) the Tribunal considers the Breaches were a result of the inadvertence and accepted lax record keeping by Mr Smith; > > (d) The Tribunal finds that Mr Smith did not make any personal gain from the Breaches. > > (e) the Tribunal finds that Mr Smith has not been dishonest in any regard to his conduct subject of these proceedings; > > (f) otherwise, no other breaches of the Corporations Act were made out. This is significant because of the number of breaches alleged by ASIC across the 6 client files; > > (g) the Tribunal took into consideration that Mr Smith called clients as witnesses from across the 6 client files who all gave favourable evidence and largely confirmed his own evidence of the circumstances of providing advice to them; > > (h) the Tribunal prefers the evidence of Ms McInnes as to Mr Smith's present understanding of his obligations to comply with the Corporations Act because she has had direct oversight of him since the Banning Order was imposed and was a compelling witness of opinion and fact; > > (i) the Tribunal takes into consideration the conditions upon which the Tribunal has imposed on Mr Smith since July 2021 in staying the Banning Order, some 4 years ago, in respect to his requirement to notify his clients (existing and new) and the hardship that has imposed on him; > > (j) the Tribunal is satisfied that there is no risk to the public in not making a banning order or in respect to the objects of the Corporations Act and the ASIC Act; > > (k) the Tribunal is satisfied in the circumstances, the objectives of general deterrence and specific deterrence have been satisfied; > > (l) the Tribunal is satisfied that no financial losses have been proven in respect to Mr Smith's conduct in respect to the Breaches; > > (m) the Tribunal is satisfied that Mr Smith has taken positive steps to mitigate the risk of him breaching the Corporations Act in the future by hiring a para-planner and having Ms McInnes conduct audits of his client files and mentor him.

1. The Tribunal has decided to set aside the decision of ASIC to make a banning order. The effect of that decision is that no banning order has been made.

Banning Order under ss 920A and 920B of Corporations Act

Notice of Hearing under s 920A of the Corporations Act

Attachment B to the Notice - List of Document upon which concerns are based

Transcript of administrative hearing of Mr Smith pursuant to s 920A of the Corporations Act

Current Company Extract - Mr Bradely Smith Financial Services Pty Ltd ACN 124 602 179

Australian Financial Services Representative Bradley Wayne Smith AFS Representative No 000235639

Advice Evolution Adviser Training and Monitoring Program

20170531 C - AIA signed application + Beneficiary Nom.pdf

The Ms' Business Trust - 2013 Financial Statements.pdf

The Ms' Business Trust - 2011 Financial Statements.pdf

The Ms' Business Trust - 2012 Financial Statements.pdf

Colonial First State First Choice on the list of worst performing funds

ASIC Regulatory Guide 175 ‐ Licensing: Financial product advisers - Conduct and disclosure

ASIC Regulatory Guide 175 ‐ Licensing: Financial product advisers - Conduct and disclosure

ASIC Regulatory Guide 175 ‐ Licensing: Financial product advisers - Conduct and disclosure

ASIC Regulatory Guide 175 ‐ Licensing: Financial product advisers - Conduct and disclosure

ASIC Regulatory Guide 98 ‐ ASIC's powers to suspend, cancel and vary AFS licences and make banning orders

Advice Evolution Australian Financial Services Licence No: 342880

Affidavit of Bradley Smith affirmed 24 June 2021 and annexed documents

Exhibits to Affidavit of Bradley Wayne Smith affirmed 2 March 2022

Exhibits of Affidavit of Bradley Smith sworn 6 July 2022

Sergius Dawson Compiled Reports including: Statement of Sergius Dawson dated 12 May 2022; Appendix 1 - Statement of Sergius Dawson dated 12 May 2022; Client File Assessments for Bradley Smith - Sergius Dawson; Statement of Sergius Dawson dated 20 July 2023; Attachment 1 - Request for Supplementary

Report dated 29 May 2023; and Supplementary Report by Mr Dawson dated 19 July 2023

Material produced by Advice Evolution Pty pursuant to the Summons dated 22 July 2024

Further material produced by the Applicant - Adviser Training & Mentoring Program - Advice Evolution 2025

[2] On 14 October 2024, the AAT became the Administrative Review Tribunal (the Tribunal). Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review to the AAT that were not finalised before 14 October 2024 are taken to be an application for review to the Tribunal. The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed by the AAT. This decision and statement of reasons is made by the Tribunal.

[12] ASIC CS at [14]-[17], [21]-[24].

[13] Australian Securities and Investments Commission v NSG Services Pty Ltd [2017] FCA 345

[14] Australian Securities and Investments Commission v Westpac Securities Administration Ltd [2019] FCAFC 187 (Westpac) per Jagot J at [301].

[15] Australian Securities and Investments Commission v DOD Bookkeeping Pty Ltd (in liq) [2023] FCA 1622 (DOD Bookkeeping) per Goodman J at [156].

[20] McDonald v Director-General of Social Security (1984) 1 FCR 354 per Woodward J at 10.

[22] Dawson supplementary report at [21].

[40] Applicant's Closing Submissions dated 26 April 2025 (Applicant's CS) at [7]-[11]; [22]-[26].

[44] cf Mr Dawson, transcript p 52, line13 to 15.

[45] This is consistent with Westpac and DOD Bookkeeping.

[46] Exhibit 113, annexure A, at [19]- [20]; see also Exhibit 115, at [42].

[50] Transcript p 55-56, line 36 to 47, 1 to 19.

[57] Applicant's Submissions dated 26 April 2023 (Applicant's Submissions) at [38].

[58] Transcript p 317, line 19 to 25, line 40 to 46.

[65] Exhibit 127 at [14(f)], Dawson supplementary report at [28]-[31].

[68] Transcript p 313, line 4 to page 314, line 5.

[71] Exhibit 114, annexure BSW5, p 173.

[72] Exhibit 114, annexure BSW5, p 153.

[73] Exhibit 127, Dawson Report at [14(i)]; Dawson Supplementary Report at [38]-[41].

[75] Exhibit 113, annexure A, at [37].

[77] Transcript p 237, line 35 to 34, p 238, line 1-11.

[78] Exhibit 114, annexure BWS5, at 11.

[79] Exhibit 114, annexure BWS5, at 32.

[81] ASIC CS at [65]; Dawson Report at [17(d)].

[85] Exhibit 113, Annexure A, at [63].

[98] Smith Witness statement at [22(c)]

[104] Transcript p 249, line 33 to 41.

[105] Transcript p 250, line 31 to 39.

[106] This is consistent with Westpac and DOD Bookkeeping.

[108] Exhibit 127, Dawson Report at [46(h)]; Dawson Supplementary Report at [103]-[1-7].

[115] Exhibit 127, Dawson Report at [49(b)].

[123] Exhibit 127, Dawson Report at [58(b)]; Dawson Supplementary Report at [136]-[137].

[125] Applicant's CS at [69]-[70].

[129] Transcript p 258, line 11 to 45.

[141] Applicant's CS at [72]-[77].

[143] Transcript p 320, line 17 to 26.

[150] Applicant's CS at [82]-[85].

[155] Transcript p 277, line 37 to 44.

[169] Transcript p 281, at line 36 to 44.

[170] Transcript p 282, at line 5 to 10.

[171] Transcript p 282, at line 16 to 24.

[172] ASIC CS at [118]; citing Schroeder and Australian Securities and Investment Commission [2021] AATA 3519 at [99].

[175] Australian Securities and Investments Commission v McCormack [2017] FCA 672

[179] Order of Deputy President McCabe dated 2 July 2021.