Tribunal upholds ASIC’s refusal of limited AFSL

Last year, Mr Watson applied to have the decision reviewed by the Administrative Appeals Tribunal (AAT).

Mr Watson holds a Bachelor of Commerce from the University of Western Australia, a graduate Diploma of Chartered Accounting from the Institute of Chartered Accountants in Australia and a Diploma of Financial Planning from Mentor Education AU.

At the time of the application, he was a director and shareholder of Advali Accountants Pty Ltd, previously known as Watson Finance Pty Ltd, and before that, Pancontinental Financial Advisers Pty Ltd.

From 23 January 2015 to 11 May 2016, the applicant was an authorised representative of Merlea Investments Pty Ltd.

In his statement of facts, issues and contentions, the applicant raised concerns about the way he had been treated by ASIC and the conduct of certain ASIC officers.

Allegations of misconduct, perjury, fraud, poor ethical conduct and bullying were also made against ASIC’s officers in his closing submissions.

His closing submissions also raised arguments that ASIC’s conduct, or ASIC’s refusal to grant the limited AFSL, breached the Australian Constitution and that the refusal to grant the limited AFSL was a breach of the Australian Human Rights Commission Act 1986.

The tribunal pointed out to the applicant that these sorts of allegations and issues were not relevant to the review being undertaken.

In assessing whether the limited AFSL ought to be granted to Mr Watson, the tribunal found that there were deficiencies in the information provided by the applicant including income statements, cash flow statements, cash flow projections, balance sheet information and balance sheet projections.

It determined that the information provided in the application did not comply with the regulations and the act, and that therefore the application was not made in accordance with section 913A of the act.

It also found that the applicant had failed to provide sufficient information, either compliant in the regulations or otherwise, to enable it to be reasonably comfortable that he had adequate financial resources for the purposes of section 912A(1)(d) of the act.

One of the key financial services that the applicant sought authorisation for was the provision of financial product advice about SMSFs.

Mr Watson sought to rely on the Diploma of Financial Planning from Mentor Education to satisfy the training requirement, but ASIC submitted that the diploma did not adequately cover the knowledge requirements for SMSFs.

The applicant’s evidence also suggested that other than providing advice to himself, the applicant had not provided any advice about SMSFs to any clients which was supervised by Merlea.

The tribunal was not satisfied that the applicant had demonstrated that he held the required knowledge in relation to SMSFs merely from having been appointed a representative of Merlea.

In his decision, tribunal deputy president Stephen Boyle acknowledged that the applicant had been a chartered accountant for many years and had not encountered issues with regulators or professional bodies.

However, the deputy president stated that “the circumstances surrounding the matters raised by ASIC and the context in which those events occurred [indicated] either a lack of care, or understanding, by the applicant of the strict and technical nature of his obligations or, potentially, an attitude that the act and the regulations do not need to be strictly complied with”.

“Accordingly, the tribunal is not satisfied that there is no reason to believe that the applicant will not comply with the conditions of an AFSL.”

The tribunal did, however, reject ASIC’s finding that the applicant was not of good fame or character.

“The tribunal finds that while some of the applicant’s conduct, his apparent lack of care for detail and accuracy in a number of his statements, including while giving evidence under oath, fall short of what could reasonably be expected of someone seeking to be engaged in the provision of financial services. That conduct does not point to an underlying character flaw sufficient to establish that the applicant is not of good fame or character,” Mr Boyle stated.

The AAT affirmed the decision of ASIC not to grant the limited licence on the basis that the application was not made in accordance with section 913A of the act, and was not satisfied that there was no reason to believe that the applicant was likely to contravene the obligations that apply under section 912A when an AFSL is granted: section 913B(1)(b).

Mr Watson has 28 days within which to appeal the AAT’s decision.