Super switching scheme sees firm hit with $9m penalty

In a public statement, ASIC stated that Financial Circle offered personal loans to consumers of up to $5,000 that could only be obtained if the consumer agreed to receive and implement financial advice.

“The advice typically recommended purchasing personal insurance products and switching superannuation providers,” ASIC stated.

“When consumers implemented the advice, significant advice fees were paid to Financial Circle directly from the consumer’s superannuation. Financial Circle also received ongoing commission payments from the insurers.”

This process often resulted in a substantial erosion of client’s superannuation balances, in many cases up to 30 per cent.

In conducting this business, the court found that Financial Circle made false and misleading representations and engaged in misleading and deceptive conduct.

It also found that it engaged in unconscionable conduct and breached its licensee obligations under its Australian Financial Services Licence (AFSL).

It was also found to have engaged in a credit activity without a licence authorising it to engage in that activity.

In addition to ordering that the company pay pecuniary penalties, the Federal Court ordered that it be permanently restrained from carrying on a financial services business and providing credit or entering into a credit contract as a credit provider.

The court also made orders requiring the company to pay ASIC’s costs.

ASIC commenced proceedings against Financial Circle in the Federal Court on 15 December last year.

In mid-January, the Federal Court of Australia then made interim orders restraining Financial Circle from engaging in a number of activities, including carrying on a financial services business, providing financial advice or entering into credit contracts.