Williams and Australian Securities and Investments Commission (Taxation) [2018] AATA 2312 (13 July 2018)

"...I do not accept that Mr Williams' clients were not disadvantaged by his conduct. Clients who received an [sic] [financial services guide] with false information were denied the opportunity of understanding the extent of Mr Williams' qualifications and, therefore, denied the opportunity of determining whether to seek advice from an alternative, qualified, financial planner."

1. The applicant did not offer a good explanation for this discrepancy when he was questioned during cross-examination at the hearing. As it happens, I did not form the impression he set out to mislead Sentry about ASIC's position. I am satisfied he was simply careless, albeit that the claim is pregnant with the possibility that the applicant continued to regard his behaviour as essentially victimless.
2. There was also a problem in relation to the applicant's advice to Sentry that he had never been the subject of a formal complaint. That advice was contained in an email dated 29 June 2017: exhibit 23. It turns out a complaint had been filed by a former client on 28 April 2017: exhibit 25. The client was unhappy with the performance of a product that had been recommended to him. The former client described his correspondence as a formal complaint but Mr Williams said it was more accurately described as something else because it had not at that point been considered in the course of the firm's dispute resolution process. The applicant said in his oral evidence that the complaint was resolved without further action after it was examined during that review process. Once again, I am not satisfied the applicant's behaviour rises to the level of dishonesty. It was the product of a fuzzy understanding of the complaints process and a precious interpretation of the rules which enabled him to disregard what would otherwise be regarded as a complaint.
3. Mr Williams was also asked about an exchange he had with Sentry in relation to business cards after the agreement was finalised. The applicant was required to submit items like business cards to a compliance officer at Sentry. He submitted a mock-up of a card (exhibit 27) but the compliance officer concluded the card might cause some confusion about the applicant's role in the organisation. The officer recommended changes to counteract any suggestion the applicant was involved in the provision of financial services in breach of the banning order. The applicant readily agreed to the changes and the business card was issued in that form (exhibit 29). Mr McTaggart SC, for ASIC, suggested the applicant's failure to anticipate the issues caught by the compliance officer was problematic if he was truly mindful of his obligations under the law. The applicant said the card was designed by a marketing agency. It was apparent he did not put much thought into the contents because, as he explained, he knew the compliance officer would review the mock-up.
4. The applicant's position was not unreasonable in the particular circumstances of the case. If he had been more closely involved in the design of the card I would be more concerned however his evidence suggests he played a minimal role in the process. It was not unreasonable for him to take that approach in circumstances where he knew the material would be subject to the compliance process.
5. I should also address the evidence which was led in relation to the question of the applicant's fame. Some of the evidence I have already discussed was relevant to both his fame and his character but there was also material that related directly to his fame.
6. The applicant said he enjoyed a good reputation prior to 2015. I have already referred to the recognition he received from his peers when he was nominated for industry awards and served on the industry association's committees. I have no reason to doubt he was regarded as a person of good fame at the time. There was no reason to doubt he enjoyed a good reputation in the wider community. But that reputation was clearly impacted when the applicant's history of dishonest behaviour came to light. He said his clients reacted in different ways. Some were upset and dispensed with his services. We now know that at least one of them complained and demanded a refund of fees because the applicant was not qualified to provide advice. Others were more understanding. A number of them remained clients of the business. The applicant said in his oral evidence that he was shunned by some friends and business associates in the aftermath of the revelations. He said some of them had re-established relations with the family through his wife. He spoke of his sense of hurt when his misdeeds were included on a website that highlighted lurid stories of serious criminal behaviour in Tasmania.
7. The applicant's wife provided a statement commenting on the aftermath of the banning order, amongst other things. The statement is dated 20 April 2017 (exhibit 9). From her perspective, the banning order had a serious impact on the applicant's standing in the community. She explained (at [13]):

"Since the banning order came in to [sic] place Troy has had to meet with clients over and over again to explain what happened. While many of Troy's friends and clients have stood by him others have rejected him and that has been hard for Troy to cope with... He is remorseful and incredibly hurt by how this has affected his family, our children and those in the industry who he respected deeply and who he worked closely with, including the young advisers he mentored and the ten staff he employs. Troy is also devastated to potentially have lost the trust and confidence of his clients, who he has put above everything else during this."

1. That description is consistent with what the applicant said in a letter to the Tribunal that was attached to exhibit 16. He noted he had become 'a pariah'. That letter was apparently written in March 2017. During cross-examination, the applicant indicated the backlash against him had dissipated somewhat. He said he had become more philosophical about any lingering hostility.
2. There are more objective guides to public perceptions of the applicant. He has furnished a number of witness statements from clients and business associates attesting to his good character, including:
   • Tracy Angwin, the chief executive officer of the Australian Payroll Association (exhibit 4);
   • Tony Leggett, the franchise principal of RAMS Tasmania and a current client (exhibit 5);
   • Jean Yeats, a long-term client (exhibit 6);
   • Allan Crane, a former employee of Financial Services Partners (exhibit 7);
   • David Pierce, a long-term client (exhibit 8);
   • Elisabeth and Brett Arnol, long-term clients (exhibits 10 and 11 respectively);
   • Shane Chapman, the applicant's brother-in-law and a long term client; (exhibit 12);
   • Joanna Harvey, a senior public servant with the Tasmanian Prisons Service and a long-standing client (exhibit 13)
   • Justin Rigby, a former employee and client (exhibit 14); and
   • David Bird, a consultant who formerly worked with the applicant (exhibit 15).
3. I was particularly struck by the statement of Mr Pierce. At the end of his statement, Mr Pierce said (at [7]):

"Troy's response to the decision that was handed down against him has solidified my respect for him and who he is as a person. Throughout this difficult time Troy has continued to be upfront in taking full responsibility for his actions and owning the mistakes of his past, taking it upon himself to personally speak with many of his clients face-to-face, making them aware of the situation and the findings handed down. This speaks to the kind of person he is and the values which are important to him in his life, even through the difficult times he has personally endured through this process..."

1. Ms Harvey's statement was also particularly forthright. After condemning the applicant's bad behaviour, she added (at [8]):

"...I continue to hold him in the same regard I always have and would not hesitate to return to him for assistance, or recommend him to others."

1. All of the statements describe the applicant in positive (in some cases, glowing) terms. They do not directly make an assessment of his reputation as such but they are nonetheless evidence of the fact the applicant continues to enjoy a measure of goodwill and respect within the community notwithstanding his misdeeds.
2. Another telling piece of evidence is the decision by Sentry to form a relationship with the applicant's firm notwithstanding the regulatory action. The questions put during cross-examination suggest ASIC doubts whether Sentry was given all the facts before they entered into the relationship but I am satisfied the applicant was sufficiently forthcoming about the details of the ban, even if he may have put an optimistic gloss on some of his explanations. The applicant pointed out Sentry did its own due diligence (see exhibit 17, statement of Troy Williams dated 14 November 2017 at [6]) and I was provided with emails from Sentry confirming it had considered the risk of the association before agreeing to the deal.

1. The regulatory regime shapes the analysis I must undertake. The power to make a banning order is found in s 920A of the Corporations Act 2001. In her reasons for decision, the delegate relied on a number of grounds referred to in s 920A when she made the banning order. She concluded:
   • ASIC has reason to believe the applicant is not of good fame or character (s 920A(1)(d))
   • The applicant has not complied with a financial services law (s 920A(1)(e)); and
   • ASIC has reason to believe the applicant is likely to contravene a financial services law (s 920A(1)(f)).
2. There is no doubt the applicant has not complied with a financial services law. On that ground alone, regulatory action is justified. The real dispute in this case is over what form that regulatory action should take. That depends on which grounds I am relying upon to take action.

Is there reason to believe the applicant is not of good fame or character?

1. It makes sense for me to start with the ground in s 920A(1)(d). If I am satisfied there is reason to believe the applicant is (as opposed to was) not of good fame or character, the options available to me are limited. If that ground is made out on the evidence before me, the only permissible response is a permanent ban: s 920B(2)(b). None of the submissions about deterrence or other matters that might be taken into account when assessing the length of a ban will be relevant if there is reason to believe the person is not of good fame or character.
2. A permanent ban is probably more accurately described as an indefinite ban since it is possible for a person subject to a ban to apply in the future for the ban to be lifted. The applicant would presumably need to establish at the time of the application that there is no longer reason to believe the applicant is not of good fame or character. The applicant's counsel, Mr James QC, said I should not take much comfort from that possibility. He argued ASIC's submissions to that effect understated the practical obstacles to a fresh application.
3. I should make some observations about the interpretation and operation of the legislation. It is clear the sub-section requires that there be reason to believe the person was of good fame and good character. It is not enough that an individual has one and not the other. Moreover, it is clear the assessment of one's fame and character must be made at the time of the hearing: see, for example, Prothonotary of the Supreme Court of New South Wales v Alcorn [2007] NSWCA 288 at [57] per Hoeben J; see also Shi v Migration Agents' Registration Authority [2008] HCA 31; (2008) 248 ALR 390. The sub-section requires that I be satisfied there is reason to believe he is - as opposed to was - of good fame and character, after all. That means there is a possibility a compromised reputation might be repaired and defects in one's character might be remedied in the interregnum between the hearing and earlier instances of bad behaviour that reflect on character or invite infamy: see, for example, Re Davis [1947] HCA 53; (1947) 75 CLR 409 at 416 per Latham CJ.
4. I was referred to a number of cases in which the dual concept of good fame and character was discussed. The cases regard 'fame' as a reference to one's reputation, while 'character' requires an examination of one's moral qualities and nature: see, for example, Prothonotary of the Supreme Court of New South Wales v P [2003] NSWCA 320 at [17]. For my own part, I am not sure there is much profit in generating synonyms for plain English words. Words like 'fame' may be old-fashioned but their meaning is clear enough and attempts to further define them are apt to mislead. Three things are clear, however.
5. First, the test of fame and character is applied with one eye to the purpose for which the test was created. In this case, I must consider the applicant's fame and character insofar as it is relevant to the role of a person providing financial services. That enquiry may well extend to conduct in other aspects of the applicant's life - including his private life - but that evidence must be evaluated critically. One might exhibit moral failings or a bad reputation in relation to matters that are, on any view, irrelevant to the business of providing financial services. Equally, one might have qualities that make one an excellent husband (or a loving son and father, or a valued member of a charity or community or religious group) which say little about the reputation and qualities expected of a person providing financial services.
6. The second point arises out of the first. The statutory language focuses on whether there is reason to believe the applicant is not of good fame or character. That is not the same thing as asking whether the applicant is of good character, or - even less accurately - whether he is a paragon of virtue since the public does not expect perfection in financial advisers. ASIC (and the Tribunal, when standing in ASIC's shoes) must identify reasons that tend logically to the conclusion that the applicant is not of the good fame or character expected of a person licensed to provide financial services. It is not enough that I be satisfied the applicant engaged in bad behaviour. That bad behaviour must point logically to relevant defects in character. Even very bad behaviour might not go that far in the circumstances of a particular case. While actions speak louder than words when it comes to assessments of character, those actions might still suggest a serious lapse of judgment rather than a character defect.
7. Third, evidence of dishonesty occurring in most contexts is problematic since a commitment (and reputation for commitment) to honest dealing is essential to this role. The centrality of honesty and trust is underlined by s 760A(b) of the Corporations Act which confirms one objective of the financial services law is to promote fairness, honesty and professionalism amongst providers of financial services.
8. I turn to the question of the applicant's fame. I note the evidence that the applicant was subject to adverse comment in the media when news emerged of his behaviour. His troubles may have been particularly newsworthy in the Tasmanian community where he previously enjoyed a degree of prominence. He confirmed he was shunned and avoided by some former colleagues and friends. The applicant has also come to the attention of the proprietors of a website which purports to record the misdeeds of unsavoury individuals.
9. I am satisfied all that evidence suggests the applicant was not at that time a person of good fame. He experienced a public fall from grace. However there is evidence suggesting his reputation has, to some extent, recovered. He says some of the individuals who terminated their relationship have resumed contact, often through his wife. He also provided statements from a number of individuals that I have already discussed who talked about his character, but they also have something to say about his reputation.
10. The best evidence that the applicant has made progress in redeeming his reputation comes in the form of the proposed business relationship with Sentry. Sentry is, by all accounts, a reputable firm. It understands the importance of preserving its own reputation. It would not risk associating itself with Mr Williams if it perceived there was a reputational risk in doing so - and there would be a reputational risk if Mr Williams' reputation had not recovered sufficiently when they struck a relationship. ASIC questioned whether Mr Williams had told Sentry the full story (about his prospects of success in these proceedings, for example) but it would be surprising if Sentry were simply relying on his word. Indeed, there was evidence before me that confirmed Sentry conducted its own form of due diligence on the proposal. There is no reason to suppose Sentry's management is naïve.
11. The applicant is unlikely to ever fully recover from the stain on his reputation. A perfect reputation is unnecessary. While I accept there was reason to believe the applicant was not a person of good fame at the time of the decision, the dust has begun to settle. The long term effect on the applicant's reputation is becoming clearer. In all the circumstances I cannot be comfortably satisfied there is still reason to believe he is not a person of good fame, as opposed to an otherwise competent person who made a serious error.
12. The other aspect of the enquiry - whether there is reason to believe the applicant is not of good character - is, if anything, more difficult.
13. The applicant engaged in dishonesty over a lengthy period. To be sure, the first act of dishonesty occurred when he was a young man. His judgment at that point might have been immature, and his character less than fully formed so that he was more susceptible to pressures from family and other circumstances. Immaturity does not excuse the bad behaviour, of course. The community is entitled to expect a reasonably high level of maturity and resilience from people entrusted with the role of providing financial services. Even so, one could argue the original error did not inevitably suggest an enduring character flaw. That assessment becomes harder to justify when one takes into account the fact the applicant allowed the deception to continue over a long period after he ceased to be a young man with immature judgment. He could have come clean and corrected the misimpression he created, but he was unwilling to face the consequences. In my view, it becomes impossible to argue the applicant did not have a serious character flaw once he actively forged certificates to cover up his long-running deception. While the applicant said he did not at the time appreciate the gravity of what he was doing, I am satisfied that a willingness to forge documents - a calculated act requiring considerable effort - provides ample reason for believing the applicant was not a person of good character. Forgery of this kind involves more significant moral turpitude. Honest providers of financial services do not mislead their colleagues and family and customers about their qualifications, and they certainly do not forge documents.
14. It is also a matter of real concern that the applicant could maintain the pretence for so long without even confiding in his wife. He effectively lived a double life over a long period. A capacity for that sort of duality is disturbing, even if I accept the applicant's claim that the charade exacted a psychological toll. Yet the applicant's relief at having been delivered from that predicament was palpable when he gave evidence.
15. While I am satisfied there is reason to believe the applicant was not of good character, I must ask myself whether that is still the case having regard to the material before me, which includes evidence of the applicant's remorse and attempts to rebuild his character.
16. The applicant made clear in his evidence before me that he acknowledges and regrets the wrong-doing. He says he unreservedly accepts his dishonesty reflected adversely on his character. He agreed in his evidence that he must not be defensive about his past behaviour and that he should accept the disgrace with humility. He says he has had the opportunity to reflect carefully on what occurred and recognises the traits in his personality that might explain how he got himself into the mess. He has been receiving counselling and has learned a great deal from the painful (and costly) experience.
17. ASIC doubts the quality of the applicant's insight into his past wrong-doing. It points to some of the statements he made to Sentry about his prospects for success in these proceedings. I was invited to infer the optimism that was reflected in those statements suggested the applicant did not take this business as seriously as he should. I have already concluded those remarks might suggest overconfidence but not dishonesty. ASIC also suggested the applicant's claim there had been no complaints when a complaint had been received indicated he was reverting to form. I earlier concluded the claim was incorrect but was not clearly the product of dishonesty. I also note the applicant's equivocal statements to the delegate when the matter was before ASIC which contrasted with his more contrite remarks before the Tribunal. I am satisfied his attitude has evolved over time.
18. I found the applicant's expressions of contrition to be genuine. He has taken active steps to address his bad behaviour and the character flaws which prompted it. He has taken responsibility for his actions. That much is evident from the statements provided by character witnesses. He is receiving counselling. He has also clearly grown up. I would add that he has almost certainly learned from his encounter with this process, and (it must be said) the near-encounter with the criminal justice system. It would be unreasonable to discount that evidence and over-emphasise other evidence of missteps that, viewed in their proper context, suggest the applicant occasionally needs to be more careful about his representations but do not suggest he is (still) dishonest: see, generally, the decision of the Full Federal Court in Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93 at [120] per Flick and Perry JJ.
19. In saying that, I acknowledge there are still concerns which must be weighed in the balance. I refer in particular to the applicant's suggestion to Sentry that ASIC had concluded nobody was disadvantaged by his conduct. I have already found that was not so, although I also found the misrepresentation was the product of carelessness rather than simple dishonesty. After what has occurred, a lack of rigour in the applicant's statements is troubling. But I am not persuaded that evidence amounts (either on its own, or in the larger context of the applicant's behaviour) to a reason to believe he has enduring defects in his character.
20. In all the circumstances, I am satisfied there is no longer reason to believe the applicant is not of good character.
21. It follows I am not satisfied the ground referred to in s 920A(1)(d) is made out. I stress that in doing so I am not disagreeing with the decision ASIC made at the time. At that point, the statements before the delegate in conjunction with the evidence of the dishonesty were more than enough to justify the decision. But the case has evolved as the applicant's insight into his own behaviour has changed.

1. The applicant has not complied with the financial services law. That means the ground in s 920A(1)(e) has been made out. There is an interesting question as to whether ASIC has reason to believe the applicant will not comply with financial services laws in the future (s 920A(1)(f)). It must be said the evidence suggests that - the dishonesty aside - the applicant was a good financial services adviser. He prospered as a result. He had many happy clients. Even the client who complained did not express dissatisfaction at the standard of the service he received. (He was complaining that he did not have the opportunity to make an informed choice about using Mr Williams' services because Mr Williams misrepresented his qualifications.) There was evidence that his firm had been audited and that it was found to be in good shape. Indeed, Mr Williams made clear he went to great lengths to be good at the job he was not formally qualified to undertake precisely because he was not qualified.
2. The one reason ASIC might have to believe Mr Williams will not comply with a financial services law is if he gives into the temptation to be dishonest. There is no suggestion that he is not technically proficient or diligent in his work, or that he is cavalier in his approach to compliance: quite the opposite. I think it is implicit in my findings in relation to s 920A(1)(d) that the applicant has now successfully addressed any propensity for dishonesty that may previously have been evident. In those circumstances, I am not satisfied there is reason to believe he will fail to comply with the laws in the future.
3. That brings me back to my finding that the applicant failed to comply with the financial services laws. That failure was no small thing: it was, as I have explained, the product of long-running dishonest behaviour that included acts of omission and serious acts of calculated deception.
4. The power to take regulatory action has been enlivened. I must now consider whether I should suspend or ban the applicant from providing financial services for a period of time. In exercising that discretion, I must have regard to the object referred to in s 760A, together with the sort of considerations enumerated by Santow J in Australian Securities and Investments Commission v Adler [2002] NSWSC 483; (2002) 42 ACSR 80 at [56]. (The relevant principles in Adler were helpfully summarised in the respondent's statement of facts, issues and contentions at [11].) The wisdom of those cases has informed the content of Regulatory Guide 98: Administrative action against financial services providers (RG98), which sets out ASIC's policy.
5. ASIC emphasised the power to ban a person (or suspend that person) from supplying financial services is partly intended to protect the public from the damage wrought by individuals who are not committed to appropriate standards of competence and integrity. I say protection is partly the intention of the licensing regime because s 760A makes clear the regime is also intended to promote efficiency and transparency in markets. That is a more ambitious goal than consumer protection. Other things being equal, regulatory action that falls short of banning - suspension, for example - which adequately achieves the protective purpose should be considered: see, generally, Sovereign Capital Ltd and Australian Securities and Investments Commission [2008] AATA 901.
6. In this case, it is not clear that the public needs to be protected from the applicant on an ongoing basis. He was a good and effective financial adviser, by all accounts - it was just that he was not entitled to do the work and lied about his qualifications. Provided I accept he has learned his lesson and addressed the defects in character and training that got him into trouble, there is no further danger to the investing public.[1]
7. I also acknowledge personal deterrence is an appropriate consideration. Mr Williams has already felt the sting of the lash of disapproval. It has been beneficial to him because it has helped him see the error of his ways and provided a means of expiating his bad behaviour. But his reformation was especially urgent because he was facing a permanent ban. I have decided a permanent ban should not be imposed but Mr Williams should not be permitted to indulge himself with the thought that he is getting off lightly. That would lessen the value of the lesson he has endured. It follows that reasonably stringent action serves a valuable purpose in his case.
8. General deterrence is especially important in a case like this. Nobody within the industry should be under any doubt that this sort of dishonesty - especially where it involves forgery - will be tolerated. The credibility of the licensing regime would be destroyed if this sort of conduct were not met with a stringent response. That is not to say the response is intended to be punitive, of course, although it is often difficult to avoid that effect: see, generally Rich v Australian Securities and Investments Commission [2004] HCA 42; (2004) 220 CLR 129 at [32]. Lying about one's qualifications as a financial adviser is a very serious matter because it has the potential to undermine public confidence in all financial advisers, which may in turn impact on the achievement of the goals referred to in s 760A. Stringent regulatory action is required to send a signal of deterrence to others - although I also accept the requirements of proportionality may limit the extent to which an individual's case may be used as an example pour encourager les autres. I think that is what Santow J meant in Adler when his Honour spoke of the need to balance personal hardship to the defendant against the public interest in consumer protection. In this case, a ban would prevent the applicant from exercising the privileges of a licence that he is now qualified to exercise. That is likely to cause significant loss - although I note he continues to be involved in the industry and he has not been prevented from earning a livelihood.
9. That brings me to the seriousness of the contravention. This consideration is obviously relevant to my deliberations over the nature and stringency of the action that is required in the circumstances of this case. As I have explained, the contravention was very serious. The applicant's dishonesty allowed him to enjoy the benefits of a licence he was not entitled to possess. In that sense, he was enriched by his bad behaviour, even if there is no evidence he did so at the expense of anybody else. The dishonest conduct occurred over a long period and it included forgery. Dishonesty almost always points to a more stringent response; the forgery is particularly damnable.
10. The harm to the public is relevant as well. The harm did not include actual loss to anybody - although, as ASIC points out, members of the public were denied the opportunity to make an informed choice about the applicant's services. That is no small thing but the applicant has not left a trail of financial ruin in his wake. That consideration counts in favour of a less stringent penalty than might otherwise be imposed if the applicant had done a bad job or caused financial loss. Having said that, the applicant's conduct may have undermined confidence in the integrity of financial advisers more generally if news of his misbehaviour causes members of the public to wonder about representations made by their own advisers. There is no direct evidence on this point but one would expect the public would be reassured to know that misrepresentations of this nature would prompt a stringent response.
11. I should say at this point I am satisfied a ban is the only appropriate response in the circumstances. I am not satisfied it would be possible to achieve the objectives of the legislation by merely imposing a suspension or seeking enforceable undertakings: cf Sovereign Capital Ltd and Australian Securities and Investments Commission [2008] AATA 901 at [84] per DP McPherson and SM McCabe. (Sovereign Capital dealt with a decision to cancel an Australian Financial Services Licence but I am satisfied the same principle applies here.)
12. ASIC suggests in RG98 that contraventions involving dishonesty would typically merit a ban of three years or more. More serious instances of dishonesty would obviously point to longer periods of banning. I accept that is so. Given the matters I have referred to above, I am satisfied the applicant should be banned from providing financial services for a period of six years. A ban of that duration is necessary to give effect to the objectives of the legislation in all the circumstances.

1. The reviewable decision is set aside. I decide in substitution that the applicant be banned from providing financial services for a period of six years.

I certify that the preceding 74 (seventy four) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

............................[sgd].........................................

[1] He has certainly moved to address the gap in his qualifications. The applicant has now completed a diploma, advanced diploma and masters' degree in financial planning and he has commenced a MBA.