ASOC paragraphs 17(d), (e), (h), 22(a), (c), (e) - Plagiarism, resourcing and deadlines
452 In overview, the position on the pleadings in ASOC paragraphs 17(d), (e), (h) and 22(a), (c) and (e) is as follows:
(1) Mr McFarlane alleges that, while investigating the March 2014 complaint, IOOF knew or ought to have known that the following allegation in the March 2014 complaint was true or, alternatively, substantially true: "IOOF plagiarised third party research reports and distributed that research without attribution or taking the time to verify that the research was accurate and/or had a reasonable basis": ASOC [17(d)] and [22(a)]. Insignia admits that this allegation is substantially true: FAD [22(a)].
(2) Mr McFarlane alleges that, while investigating the March 2014 complaint, IOOF knew or ought to have known that "the activities of the Research team were not in accordance with ASIC Regulatory Guide 79 in relation to research report providers, in particular Part C 'Research quality, methodology and transparency'": ASOC [22(e)]. Insignia partially denies this allegation: FAD [22(e)]. Insignia admits that as part of the March 2014 investigation, IOOF reviewed a number of presentations which were found to contain material that had not been appropriately attributed: FAD [22(e)(iv)]. However, Insignia further contends that:
(a) the allegation of plagiarism related to IOOF's publication of research reports published by JP Morgan which either was obtained improperly, or used without proper attribution; and
(b) at the relevant time, a contractual arrangement was in place which permitted IOOF to use content from JP Morgan's research reports in certain circumstances: FAD [22(e)(i)-(ii)].
(3) Mr McFarlane alleges that, while investigating the March 2014 complaint, IOOF knew or ought to have known that the following allegation in the March 2014 complaint was true or, alternatively, substantially true: "IOOF's Research team was inadequately resourced, leading to shortcuts being taken such as the alleged plagiarism, with only two analysts in the department: (i) covering all of the ASX200 stocks plus other equities which might come onto that index; and (ii) during reporting season being expected to produce reports on approximately 300 companies over a three-week period, equating to approximately 14 stock reports per day": ASOC [17(e)] and [22(a)]. Insignia denies the substance of this allegation: FAD [22(a)].
(4) Mr McFarlane similarly alleges that, while investigating the March 2014 complaint, IOOF knew or ought to have known that "there was inadequate resourcing (technological and human) of the Research team …": ASOC [22(c)]. Insignia denies this allegation: FAD [22(c)].
(5) Mr McFarlane similarly alleges that, while investigating the March 2014 complaint, IOOF knew or ought to have known that Mr Hilton imposed impractical deadlines for research reports during reporting seasons which placed client investments at risk by not giving due consideration to the results, a practice which ASIC explicitly warned against and then became a source of intimidation and harassment: ASOC [17(h)] and [22(a)]. Insignia denies the substance of this allegation: FAD [22(a)].
453 In the light of the admissions made by Insignia, the plagiarism allegation referred to in ASOC paragraph 17(d) is not in dispute.
454 I now turn to analyse the overlapping questions of whether Mr McFarlane has established the substantial truth of:
(1) the allegation in ASOC paragraph 22(e) that IOOF's activities were not in accordance with ASIC Regulatory Guide 79 (RG 79) (in particular Part C of that Guide);
(2) the allegation in ASOC paragraphs 17(e), 22(a) and 22(c) that IOOF's Research team was inadequately resourced; and
(3) the allegation in ASOC paragraph 17(h) and 22(a) that Mr Hilton imposed impractical deadlines for research reports which placed client investments at risk.
455 ASIC's RG 79, titled "Research report providers: Improving the quality of investment research" and dated December 2012, relevantly provided under Part B (titled "Research reports and research report providers"):
79.30 We do not consider that research report providers can effectively meet their obligations to manage and disclose their conflicts of interest where research is "white labelled" (i.e. prepared by one entity and rebranded and distributed by another), without attribution to the research report provider who originally prepared it. Distributing research in this way makes it difficult for users to assess the value of the research and the impact of any conflicts of interest on the quality and integrity of the research. Licensees preparing research reports can meet their obligations where a research report is co-branded with the licensee distributing the report.
79.31 If a research report prepared by one licensee (A) is provided to other persons (clients) by another licensee (B) then, for the purposes of this guide. Licensee A is the research report provider, and not Licensee B (regardless of whether Licensee B also puts its own name on the research report). However, this is only the case where:
(a) Licensee A causes or authorises Licensee B to provide the advice contained in the research report to other persons; and
(b) Licensee B makes no material changes to the advice contained in the research report.
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79.33 Where Licensee B makes material changes to the research prepared by Licensee A, Licensee B assumes the obligations of the research report provider as set out in this guide. Any recommendations in the report must be those of Licensee B based on its own assessment of the product in compliance with the quality, conflicts, transparency and disclosure requirements of this guide. (emphasis added)
456 ASIC's RG 79, under Part C (titled "Research quality, methodology and transparency"), contained the following provisions relevant to resourcing of Australian Financial Services Licensees:
79.74 AFS licensees have general obligations under s912A(l) of the Corporations Act to:
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(d) have adequate financial, technological and human resources to provide the financial services covered by their licence and to carry out supervisory arrangement
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79.76 Human resources are a key input to research report providers' processes and output. Research report providers should allocate sufficient resources to support the effective performance of their research staff.
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79.78 Research report providers often cover a substantial number of financial products of varying complexity. Careful consideration needs to be given to balancing the commercial imperative to provide broad product coverage with the need to maintain the quality of research output and the allocation of adequate staff time to each research report.
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79.79 To analyse financial products well, research report providers need to allocate appropriate resources to each research task. This includes allocating sufficient numbers of staff with suitable qualifications for the research task and setting appropriate timelines for the completion of tasks.
457 ASIC's RG 79, under Part C, also contained provisions requiring that research reports be based on reasonable grounds at RG 79.89-79.91. Notably, RG 79.91 provided:
79.91 To reduce the risk that research reports are not based on reasonable grounds, research report providers should ensure that each report reflects the views of the person who takes responsibility for it (e.g. the person who prepared it or the person who approved its distribution).
458 IOOF's Research Policy dated June 2014 recorded that the Research team comprised 10 people: the Head of Research, six managed fund analysts, two equity analysts and an administrative assistant.
459 Max Riaz's email of 3 March 2014 to Mr Hilton, which has relevantly been set out at [28] above, alleged that the reports that he had been producing were "highly compromised in the areas of snatching material from other sources without mentioning proper sources without sourcing mentioned". Max Riaz went on to state that "the financials are plagiarised from JP Morgan". The effect of Max Riaz's email was that it was necessary to plagiarise from JP Morgan reports because of the lack of adequate resourcing of equities analysts to produce the relevant reports. He stated that he had produced "37 reports in the month of February". He stated: "The easy option for me will be to re-badge the JP Morgan report and there will be no delays but then please be informed that I will have very updated knowledge of what I am reporting on and it further compromises my professional integrity."
460 In his email to Mr Urwin on 2 April 2014, Max Riaz made a further assertion about the resourcing of the Research team, alleging that:
[O]ften we have to cut & paste (plagiarise) information from external sources in the body of the report and pretend as if its our own. The reason why this has been going on for years is because you have two analysts covering literally the entire equities market (its not just the ASX200 stocks as there are stocks that go in out of the index all the time). The size of our coverage has to be seen on the scale of size and time. Time because each reporting period we are obliged to produce reports as companies report their financials. The two analyst are expected to publish sellside like research reports but without the necessary resources which includes lack of time as I mentioned. During the reporting season (interim & final, twice a year), we are expected to work like machines and produce reports on around 300 companies over say a three week period. This equates to a workload of 14 stock reports a day.
461 I observe that one aspect of Max Riaz's allegations in his 3 March 2014 allegations and his 2 April 2014 allegations appears to be inconsistent. Whereas, in his email of 3 March 2014, Max Riaz stated he had produced 37 reports in the month of February, in his email of 2 April 2014, he alleged that two analysts were expected to produce reports "on around 300 companies over a three week period", equating to "14 stock reports a day".
462 Mr Hilton's initial position in response to Max Riaz's allegations is recorded in a draft proposed response to Max Riaz's email of 3 March 2014, which Mr Hilton sent to Ms Corcoran on 4 March 2014. Ms Corcoran advised against sending the response, and it does not appear to have been sent to Max Riaz. The draft response relevantly stated:
Max, 37 reports in Feb is an average of xxx per day. Given an analyst is monitoring changes in between interim and final reporting, then it should not take long to decide if your view has changed. This would appear [to] be confirmed in that you completed six reports all of which were forwarded to me on the evening of 3rd March. An average of xxx per day is not sufficient output in my view. I have had to ask that you increase output in previous reporting periods. Reporting season is the busiest time of year for an equity analyst Max, that is why I was surprised when you contemplated annual leave during February without the ability to still complete reports.
If a report is highly compromised, it should not be forwarded to me for approval. You have an obligation not to provide compromised research and I am alarmed at the possibility you have. With respect to "snatching material from other sources without mentioning proper sources" the research reports finalized by yourself are considered your views Max and I have always worked on this basis. If there are instances where this is not the case, please advise immediately.
Your view on plagiarism is disappointing. Yes we do use quant from JP Morgan, however it is with permission and I need not provide you with the finer details or group commercial agreements. The definition of Plagiarism is to use without permission and this is not the case.
ASIC does require adequate time for an analyst to produce a report and it is my view you do have adequate time. An initiating coverage report can be expected to take some time. However, during reporting season you are not initiating coverage, rather you should be in a reasonable position to to decide if a result is above, in line or below expectations.
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It is not my view that we contravene ASIC requirements, nor have you been privy to recent resourcing discussions.
463 Mr Hilton's reference to having "permission" to use JP Morgan analysis appears to be a reference to a Research Agreement between Ord Minnett Limited (an entity that was part-owned by IOOF and JP Morgan) and JP Morgan in relation to the provision and use of JP Morgan research (JP Morgan Research Agreement). The agreement relevantly provided that JP Morgan would provide its research reports to Ord Minnett (cl 2.1); that Ord Minnett may provide the reports to any of its related bodies corporate (including IOOF) (cl 2.5); that the reports were permitted to be used by Ord Minnett or its related entities "as the basis for conducting and producing independent and suitably adapted" research reports for distribution to their retail client base (cl 4.1); and that such use was on various conditions, namely that the relevant entity would take full ownership and responsibility for the research, would not indicate explicitly or by implication that JP Morgan was involved in the preparation of the research, would not cite JP Morgan as a source, and would devise and apply its own recommendation criteria and terminology that is different to, and independent of, the recommendation criteria and terminology used by JP Morgan in the research (cl 4.2).
464 In a subsequent interview with Mr Urwin on 17 March 2014, Mr Hilton was also asked about the resourcing of the Research team. Mr Urwin asked him whether he had the staffing and resources with the appropriate skills and expertise. Mr Hilton responded: "No. The current course of events highlights this. We have a growing network which has placed strains on current resources and during peak periods".
465 During the course of investigating Max Riaz's complaint, Mr Urwin was provided with various documents asserting or evidencing that Mr Hilton and his team had previously considered whether the Research division's activities were in accordance with RG 79. This included:
(1) an email from Mr Hilton to Mr Urwin on 20 March 2014, stating that he had reviewed the Guide "in its entirety and decided we were largely compliant, some minor changes were implemented". It appears from the email chain that Mr Hilton was asserting that this review was undertaken in December 2012;
(2) an email from Mr Hilton to Mr Farrell on 24 June 2013, in which Mr Hilton, referring to the Guide, stated that attribution to JP Morgan and Ord Minnett was not required, "as we consider that we are making significant changes to the reports (others may have a different view)";
(3) an email from Mr Hilton to Mr Urwin on 1 April 2014, which contained a table analysing the requirements in RG 79 and comments as to whether any change was required to existing processes in the Research team. It is not entirely clear when this analysis was undertaken, however Mr Hilton's comments indicated that it was prepared in response to an update to RG 79 which occurred in December 2012. The table was prepared by Ms Abercromby. On the issue of distributing research prepared by another licensee, it was determined that there was "no change required to the existing process". This was because: "The analyst will materially change the information in this report and independently determine a Rating. The Research recommendation clearly articulates the rationale for the rating".
466 The investigation of Max Riaz's complaint resulted in mixed conclusions as to whether IOOF's conduct constituted impermissible plagiarism and whether the Research team was inadequately resourced:
(1) The Summary & Action Plan dated April 2014 recorded a finding that an agreement with JP Morgan allowed "all entities within the IOOF group to utilise Research, to use the data however they are not allowed to mention the source, therefore this is not plagiarism in this context". The Summary & Action Plan further stated that there were a number of research presentations which were "not correctly sourced or did not have a disclaimer attached". It was determined that various actions would be taken in response to these findings, including: that a policy in relation to plagiarism would be established and rolled out to the Research team; that the IOOF marketing team would review all presentations to ensure they were adequately sourced; and that Mr Hilton would be required positively to ensure that each presentation or research report had the appropriate disclaimer attached.
(2) A member of IOOF's legal team prepared a memorandum analysing the requirements of RG 79 dated 12 May 2014, which included comments about the application of the Guide to IOOF's Research team (RG 79 Memorandum). The memorandum acknowledged that "one of the key issues" in the review was the attribution of research reports to other research providers. The memorandum further stated that where material changes have been made to a research report, the Research team "will assume the obligations of a research report provide". On the other hand, the memorandum stated that where material changes had not been made, "the report must be attributable to the licensee who prepared the report". However, the report did not contain a positive finding that IOOF had in fact contravened RG 79 by relying on reports prepared by JP Morgan without attribution. The memorandum also did not contain a finding as to the adequacy of resourcing within the Research team, instead stating that "this is a business requirement".
467 It appears that IOOF made changes to its resourcing of the Research team following the March 2014 complaint. On 12 March 2014, Mr Hilton sought approval from Mr Farrell to hire an additional research analyst as a priority. Mr Hilton relevantly stated:
The Research Team comprises 4 Managed Fund Analysts, 2 Equity Analysts (one of whom is presently on leave for an undefined period), Head of Research (covering as an equity analyst) and an Administration Assistant. Research staff members have been increasingly involved in the regulatory demands imposed by bodies including APRA which detracts from investment tasks as well as demands from other internal departments and IFA's. This appointment is a priority and will be followed by a request for an equity analyst in order that research can meets its obligations
468 By 10 April 2014, IOOF had hired an additional research analyst.
469 The Summary & Action Plan, which was last amended on 8 April 2014, also appeared to contemplate a further review of the Research team structure, relevantly stating:
Structure needs to be revisited to ensure that there is the right delegation in place and that Peter is able to spend adequate time in the office to manage and mentor the staff. If in event that this is not possible then should determine if a resource within the team should be responsible for the day to day people management
470 Against this background, on 14 April 2014, Mr Hilton and Ms Abercromby met with Jacqueline Hippolite, a member of IOOF's HR team. Ms Hippolite requested that "in order to ensure that our next meeting addresses the resource requirements now and in the near future can I please ask that you draft new PDs [position descriptions] for all staff". On 16 April 2014, Mr Hilton sent to Mr Farrell and Ms Hippolite the updated position descriptions and requested approval to hire an additional analyst.
471 On 16 May 2014, IOOF announced its acquisition of SFGA, a financial advice and wealth management business. The acquisition was completed via a scheme of arrangement in August 2014. Following the announcement of the acquisition, further consideration was given to the resourcing of the Research team:
(1) On 11 June 2014, on the basis of the advice of a member of IOOF's legal team on the same day, Ms Abercromby suggested in an email to Mr Hilton that: "To manage any potential conflict of interest IOOF should source external research for distribution to advisers". The relevant advice of IOOF's legal team, which was set out in an email from Victoria Fraraccio, legal counsel at IOOF, to Ms Abercromby dated 11 June 2014, included an analysis of RG 79, and a statement that "ASIC RG 79 states that where a licensee wishes to distribute research about its own products a clear conflict of interest arises. In such cases, ASIC expects licensees to avoid the conflict by obtaining research from an external source". By email on 15 July 2014, Mr Hilton raised the matter with Mr Farrell, noting that "we have been collating some data on coverage from external research houses regarding which IOOF funds they cover". A memorandum prepared by Ms Abercromby outlining the business case for outsourcing research reports dated 21 October 2014 relevantly referred to Mr Farrell having requested Mr Hilton to consider outsourcing managed fund research reports.
(2) An internal IOOF document, whose title and author are not identified, but which appears to be dated 18 November 2014 referred to resourcing of the Research team. The document referred to the scope of the Research team's role "[l]ess than 2 years ago" and went on to state "the current an[d] foreseeable future is vastly different". The document subsequently stated: "We are concerned with the current resourcing we will be unable to fulfill our regulatory requirements or continue the high service standards offered to advisers".
(3) Similarly, a draft document titled "Advice Division Restructure December 2014" relevantly stated:
Over the last 12 months the Advice Division has consolidated and grown, specifically through the acquisition of SFG. As a result of this consolidation and growth it is necessary to re-assess the structure to meet the needs of the business. An effective group of shared services and a structure "fit for purpose" is now required as IOOF now has a leading position in the industry, specifically when measured by Funds Under Advice.
(4) On 15 January 2015, Mr Farrell sent an email to Mr Kelaher and other executives endorsing an outsourcing proposal. Mr Farrell's email relevantly stated:
As discussed briefly at the Leadership meeting last Friday, the intention is to engage an external research provider to provide IOOF research with core managed fund research rather than perform analysis of an ever growing list of managed funds internally.
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I endorse this proposal and recommend that we move to commercial negotiations and implement as soon as practicable. This solution assists with the growing adviser base and associated demands, the need to have an external research house reviewing IOOF (and related body corporate) funds, makes the increased oversight of the Lonsdale APL and the APL review a more streamlined solution and transition and provides capacity for the IOOF research team to provide added value services to the network.
(5) On 11 February 2015, Melinda Hofman, Corporate Affairs Manager at IOOF, sent a message on behalf of Mr Kelaher, which referred to various changes being implemented across IOOF's advice and shared services divisions, including the appointment of Matthew Drennan as the Group Head of Research and Portfolio Construction, reporting to Mr Farrell. Mr Hilton's title was changed to Head of Advice Research, reporting to Mr Drennan. In making this announcement, the email relevantly stated:
Following the acquisition of SFG Australia (SFGA) in August last year, the remainder of 2014 was spent better understanding the business, its people and their processes.
To ensure the structure of IOOF meets the requirements of the changing face of the industry, IOOF's business strategy, and its continued growth, the leadership group have agreed on a number of changes across our advice and shared services divisions, which now incorporates the SFGA business and prepares the group for the opportunities and challenges we face in 2015.
(6) On 29 July 2015, Matthew Drennan gave a presentation to the IOOF Risk & Compliance Committee in which he referred to a "[p]lan to remove functions from the Research team and create more robust Chinese Walls around stockbroking and research business". Mr Drennan further noted that "Although sharing research is industry practice it will not be acceptable going forward". On the following day, Mr Drennan sent a copy of his notes from his presentation to the Risk & Compliance Committee. Those notes referred to (without elaboration) the "revised structure and responsibilities of Research team", the appointment of required staff, and referred to a further "RG 79 gap analysis and recommendations".
(7) In about July 2015, IOOF engaged PwC to carry out a review of the current design and operating effectiveness of the systems processes and internal controls for, amongst other things, the "Research Advice team". On 28 August 2015, PwC issued the PwC Interim Report setting out its findings and recommendations with respect to the first phase of PwC's scope of review, being the review of the design of IOOF's systems, processes and internal controls. That report contained a finding that: "due to the broad range of investments, many of which are domiciled offshore, the size of Research does not appear sufficient to monitor all relevant products on the Platform in depth." In the report, PwC further stated:
We observed that two members of Research are responsible for preparing research in respect of ASX 200 securities. Currently research on equities is done using a combination of research from third party research providers (Ord Minnett and Lonsec) and/or in-house research. Under the current business model, it appears staff members are currently stretched in undertaking their research. We acknowledge this risk is mitigated as more research is outsourced.
472 Having regard to the above evidence, I am satisfied that Mr McFarlane has established the truth of the allegation in ASOC paragraph 22(e) that IOOF's activities were not in accordance with RG 79 (in particular, Part C of that Guide).
473 The evidence establishes that the terms of the JP Morgan Research Agreement permitted IOOF to use research reports prepared by JP Morgan. However, nothing in the JP Morgan Research Agreement could have the effect of superseding the guidance in RG 79. As noted above, RG 79.33 (in Part B) permitted the use by one licensee (Licensee B) of research by another licensee (Licensee A) in circumstances where material changes had been made to the report, so long as any recommendation in the report was based on Licensee B's "own assessment" of the product in compliance with the quality, conflicts, transparency and disclosure requirements of the Guide. RG 79.91 (in Part C) further provided that research report providers should ensure that each report reflects the views of the person who takes responsibility for it.
474 In the present case, the allegation of Max Riaz, as recorded in his email of 3 March 2014, was to the effect that the reports he was producing for IOOF were "highly compromised", that he was merely plagiarising or re-badging JP Morgan's reports, and that this compromised his "professional integrity". Max Riaz was one of two analysts producing such reports. I draw the inference from these allegations that Max Riaz's position was that he was not undertaking his "own assessment" of the JP Morgan reports before issuing reports in IOOF's name, nor did those reports reflect his views. Max Riaz's allegations were not contradicted by Mr Hilton, who merely stated, in his draft proposed response on 4 March 2014 that, he had always proceeded on the basis that reports finalized by Max Riaz represented his views. In these circumstances, I am satisfied that Mr McFarlane has established the allegation in ASOC paragraph 22(e) that IOOF's activities were not in accordance with RG 79, in particular RG 79.33 and RG 79.91.
475 I am satisfied that Mr McFarlane has established the truth of the allegations in ASOC paragraph 22(c) that IOOF's Research team was inadequately resourced. Taken together, the evidence supporting this plea comprises: the allegations made by Max Riaz in his emails of 3 March 2014 to Mr Hilton and 2 April 2014 to Mr Urwin; Mr Hilton's comments on resourcing in his interview with Mr Urwin on 17 March 2014; steps taken in March and April 2014 to hire additional resources at the research analyst level; an internal IOOF document dated 18 November 2014 referring to a concern about "current resourcing"; steps taken in 2015 to restructure the Research team, including by outsourcing fund research; and a finding by PwC in its Interim Report to the effect that staff members were "currently stretched in undertaking their research".
476 Some of this evidence, on closer analysis, does not, on its own, support a conclusion that the Research team was inadequately resourced. More particularly:
(1) The internal IOOF document dated 18 November 2014 does not support a conclusion that the Research team was inadequately resourced. It is clear from the language of that document that it is referring to future resourcing levels, in the light of anticipated changes at IOOF.
(2) I do not consider that the steps taken in 2015 to restructure the Research team support a conclusion that IOOF's Research team was inadequately resourced at the time that March 2014 complaint was made. These steps were taken following IOOF's announcement of its merger with SFGA, and this merger appears to have contributed to the restructure of the Research team.
(3) I also do not consider that the PwC Interim Report supports a conclusion that the Research team was inadequately resourced at the time of the March 2014 complaint. The PwC Interim Report was prepared on 28 August 2015; that is, some six months after the restructure of IOOF's advice and shared services division was announced. The report expressly refers to arrangements whereby "research on equities is done using a combination of research from third party research providers … and/or in-house research". Those arrangements differ from the resourcing arrangements in the Research team that prevailed at the time of the March 2014 complaint. PwC's findings therefore cannot be relied upon to draw any conclusion as to the adequacy of resourcing arrangements for the Research team at the time of the March 2014 complaint.
477 Nonetheless, on balance, I consider that the evidence does establish that, at the relevant time, the Research team was inadequately resourced. Max Riaz's emails of 3 March 2014 to Mr Hilton and 2 April 2014 to Mr Urwin clearly articulate a concern with resourcing of the Research team. At first, Mr Hilton appeared to wish to contest these allegations - as demonstrated by his draft proposed response to Max Riaz on 4 March 2014. However, that response was not sent. By the time he was interviewed on 17 March 2014, Mr Hilton acknowledged that "the current course of events" highlighted that he did not have staffing and resources with the appropriate skills and expertise. Following the March 2014 complaint, IOOF hired an additional research analyst, and Mr Hilton made a request to hire a further research analyst. I therefore find that IOOF was aware that the Research team was inadequately resourced as alleged in ASOC paragraph 22(c).
478 I am not, however, satisfied that IOOF was aware that the allegation as to under-resourcing in the March 2014 complaint, as recited in ASOC paragraph 17(e), was true or substantially true. As noted above, I accept that the evidence establishes that IOOF's Research team confronted resourcing issues. However, the allegation put by Max Riaz on 2 April 2014 and referred to in ASOC paragraph 17(e) was that: (i) IOOF's Research team relied on only two analysts in the department covering all of the ASX200 stocks plus other equities which might come onto that index; and (ii) during reporting season, those two analysts were "expected to produce reports on approximately 300 companies over a three week period, equating to approximately 14 stock reports per day". That allegation is difficult to reconcile with Max Riaz's email to Mr Hilton on 3 March 2014, in which he stated that he had produced 37 reports in the month of February. It is also inconsistent with an IOOF document, dated 29 June 2015, responding to allegations in the Fairfax articles which stated that: "the industry has a universe of 300 stocks and thousands of managed funds, but IOOF's approved product list (and direct equities list) is much smaller". I am not satisfied that Mr McFarlane has established the truth of ASOC paragraph 22(a), insofar as it refers to the allegation in ASOC paragraph 17(e).
479 I am satisfied that Mr McFarlane has established that IOOF was aware of the truth of the allegation in ASOC paragraph 17(h), namely that Mr Hilton set impractical deadlines for research reports during reporting seasons which placed client investments at risk by not giving due consideration to the results. Such a conclusion flows logically from my conclusion that IOOF's Research team was under-resourced, and the statements by Max Riaz that, by reason of this under-resourcing and his workload during reporting season, it was necessary for him to plagiarise JP Morgan reports without giving those reports due consideration. On the basis of this evidence, I draw the inference that the deadlines imposed by Mr Hilton to prepare research reports were impractical, and that this resulted in the Research team preparing reports without due consideration. I accept that an inference also arises from Max Riaz's email of 3 March 2014, which I draw, that the consequence of this was that client investments were placed at theoretical risk by reason of Max Riaz's lack of consideration of the content of the reports he was publishing. I note, however, that no evidence was adduced by Mr McFarlane that, in fact, the research reports produced by Max Riaz were defective in a way that caused clients to suffer loss.
480 I note that RG 79.74, 79.76, 79.78, and 79.79 provide, broadly, that Australian Financial Services Licensees must ensure the sufficiency or adequacy of resources for the production of research reports and the performance of research tasks, and ensuring that staff have sufficient time for completion of tasks. Having concluded that IOOF was inadequately resourced for the purposes of producing research reports (see at [477] above), and that Mr Hilton set impractical deadlines for producing research reports (see at [479] above), I also conclude that IOOF's activities were not in accordance with these paragraphs of RG 79. This a further basis for my conclusion, set out at [472] above, that Mr McFarlane has established the truth of the allegation in ASOC paragraph 22(e) that IOOF's activities were not in accordance with RG 79 (in particular, Part C of that Guide)