Financial advice firm hit with $1.4m penalty
A financial advice firm and its sole director have been hit with a $1.4 million penalty for engaging in false and misleading conduct.
The Federal Court has ordered that Dover Financial Advisers (Dover) pay a $1.2 million penalty for engaging in false or misleading conduct, with founder Terry McMaster, Dover’s sole director, instructed to front up a $240,000 penalty for being knowingly concerned in Dover’s conduct.
These penalties follow the Federal Court’s 22 November 2019 judgment, which found that Dover engaged in false, misleading or deceptive conduct when it provided a Client Protection Policy to 19,402 clients between around 25 September 2015 and 30 March 2018, and that Mr McMaster was knowingly concerned in Dover’s contraventions.
In that judgment, His Honour Justice Michael O’Bryan found that the title of the Client Protection Policy “was highly misleading and an exercise in Orwellian doublespeak. The document did not protect clients. To the contrary, it purported to strip clients of rights and consumer protections they enjoyed under the law.”
In handing down his penalty decision on Friday, 5 March 2021, Justice O’Bryan said, “many clauses of [Dover’s] Client Protection Policy sought, perversely, to make the client responsible for failings and inadequacies in the advice provided to them”, and that “the contravention arose out of the conduct of the most senior management within Dover, being Mr McMaster”.
While not satisfied that Mr McMaster was consciously aware that the Client Protection Policy contained a false or misleading statement, Justice O’Bryan observed that he had been aware of all the relevant facts making it so, and that “Mr McMaster’s behaviour following the institution of these proceedings indicates that he has only a limited appreciation of the seriousness of the contravening conduct and little if any contrition for the wrongdoing”.
ASIC commissioner Danielle Press said the purpose of Dover’s Client Protection Policy was to exclude or limit Dover’s liability to clients to its own financial benefit.
“The significant penalties handed down today demonstrate the seriousness of this misconduct and will act as a deterrent to others who believe they can get away with similar behaviour,” Ms Press said.
In arriving at the penalty, the court considered the 19,402 contraventions of the law — one contravention for each time the Protection Policy was provided to a client.
The case against Dover Financial Planning was one of the first cases arising out of the banking and financial services royal commission.
ASIC’s case centred on terms contained in the policies which exempted the company.
It largely focused on the question of whether Dover’s conduct in providing a document entitled the “Client Protection Policy” to clients (either with, or incorporated into, statements of advice to clients) was “misleading or deceptive” or “likely to mislead or deceive” within the meaning of s 1041H of the Corporations Act 2001 (Cth) (Corporations Act) and s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and/or a “false or misleading representation” within the meaning of s 12DB(1)(i) of the ASIC Act.