The Financial Services and Credit Panel (FSCP) issued a written reprimand to an adviser who it said failed to ensure his client understood his CGT responsibility.
In a brief statement, the FSCP said it had sent a “written reprimand” to an anonymized advisor under the name “Mr. W” for advice given in August 2022.
According to the FSCP, the relevant provider gave advice to a client in March 2022, which included a recommendation to make a tax-deductible contribution to pensions in order to reduce the tax payable on expected capital gains from the planned sale of an investment property.
“The relevant supplier was informed of the sale of the property in July 2022 and in August 2022 the relevant supplier confirmed that the contribution could be made,” it says.
“However, the contract for the sale of the property was signed in the 2021/22 financial year and the client did not have taxable income in the 2022/23 financial year to benefit from the tax deduction.
“The service provider concerned did not explain to the customer that capital gains tax is due when signing the sales contract nor took steps to confirm the date of signing the contract before implementing the advice.”
The hearing panel determined that it “believed that the applicable supplier had contravened sections 961B(1), 961G and 921E(3).” [of the Corporations Act] in particular, they have not demonstrated their compliance with the values of diligence and competence of the Code of Ethics and with standard 5”.
Standard 5 of the Code of Ethics states that all advice and financial product recommendations you give to a client must be in the client’s best interests and tailored to their individual circumstances. You must be satisfied that the client understands your advice and the benefits, costs and risks of the financial products you recommend, and you must have reasonable grounds to be satisfied.
Other than doing nothing, a written reprimand is the lowest level of action available to the FSCP.
The reprimand will not be published in the Register of Financial Advisers; however, it is provided to the advisor’s AFSL.
Financial Services Minister Stephen Jones recently announced that the government has reappointed 24 FSCP members for a three-year period starting January 1, 2025.
ASIC is responsible for convening individual panels to consider disciplinary matters. Each panel must consist of a chair (an ASIC staff member) and at least two other members, whom ASIC must select from a list of eligible individuals appointed by the Minister.
“Candidates bring with them a range of knowledge and experience in business, corporate administration, financial markets, financial products and services, law, economics, accounting, taxation, credit activities and credit services,” Jones said.
