Betalli and Australian Securities and Investment Commission

Betalli and Australian Securities and Investment Commission [2024] AATA 2085 (27 June 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s) 2021/2774
Re:Christopher Nadir Betalli
APPLICANT

Australian Securities and Investment CommissionAnd
RESPONDENT

DECISION
Tribunal:Mr Rob Reitano, Member
Date:27 June 2024
Place:Sydney

The delegates decision is varied so that there will be a decision that Mr Betalli is prohibited from providing any financial services for a period of twelve months.
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Mr Rob Reitano, Member
CATCHWORDS
CORPORATIONS LAW – banning order – obligation to act in best interest of client – obligation to give financial advice – likelihood of future contraventions – competence and training – specific deterrence – general deterrence – need for public trust and confidence in financial advisors – Regulatory Guideline 98 - applicant prohibited from providing financial services for twelve months – decision varied
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Corporations Act 2001 (Cth)
CASES
HIH Insurance Limited (in prov liq) & Ors v Adler (2002) 42 ACSR 80
Rich v Australian Investments and Securities Commission [2004] HCA 42
SECONDARY MATERIALS
Regulatory Guide 98: ASICS powers to suspend, cancel and vary AFS licences and make banning orders’
REASONS FOR DECISION
Mr Rob Reitano, Member
27 June 2024

This decision concerns a review of a decision of a delegate of the Australian Securities and Investment Commission (ASIC) made on 22 April 2021 under s.920A and s.920B of the Corporations Act 2001 (Cth) (Act) to make an order which prohibited Christopher Nadir Betalli (Mr Betalli) from providing any financial services for a period of two years.
The decision of the delegate took effect for a brief period of almost eight weeks between 1 May 2021 and 24 June 2021 after which it was stayed on conditions pending the final determination of the application for review.
I have decided to vary the order so that the prohibition upon Mr Betalli from providing financial services shall be for a period of twelve months rather than two years. These are my reasons for making that decision.
WHAT IS THE REGULATORY REGIME?
At the centre of the regulatory provisions that are relevant here is s.920A of the Act. The relevant parts of section are straightforward so far as this matter is concerned.
I will return to s.920A in a moment, but before doing so it is useful to start with s.760A which identifies the objects that are relevant to all of the legislative provisions applicable in this case. Section 760A of the Act provides:
The main object of this Chapter is to promote:
(a)confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and
(aa) the provision of suitable financial products to consumers of financial products; and
(b)  fairness, honesty and professionalism by those who provide financial services; and
(c)       fair, orderly and transparent markets for financial products; and
(d)  the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.
Sub-section 920A(1) of the Act gives ASIC the power in writing to make what is known as ‘a banning order’ which is an order that prohibits a person from providing financial services against a person if one of very many circumstances apply. Three are relevant, namely:
(da)ASIC has reason to believe that the person is not adequately trained or is not competent to:
(i)provide one or more financial services; or
(ii)perform one or more function as an officer of an entity that carries on a financial services business; or
(iii)control an entity that carries on a financial services business; or
…
(e)the person has not complied with a financial services law (other than subsection 921E(3) (relevant providers to comply with the Code of Ethics); or
(f)ASIC has reason to believe that the person is likely to contravene a financial services law
Sub-section 920A(1B) makes clear that the word ‘contravention’ in s.920A(1) extends to a failure to comply with a duty imposed by the law, even if the provision imposing the duty is not a civil penalty or offence provision.
Section 920B provides that a banning order ‘may specify that the person is prohibited from doing one or more’ things of which the relevant one in this case is ‘providing any financial services.’ Section 920B(2)(b) so far is relevant provides that ‘a particular prohibition specified in the order applies against the person … either permanently or for a specified period’. There was no suggestion that a permanent order was in scope in this case.
There were in this case two sets of obligations which are related to one another and give rise to considerable overlap in their content that were relevant to the failures to comply with financial services laws and the likely future conventions of a financial services law.
The first set of obligations relates to statements of advice that an authorised representative providing personal advice to a retail client was required to provide (s.944A and s.946A). It is unnecessary to deal with what constitutes ‘personal advice’ as no issue was taken about that. Nor is it necessary to address the exceptions to providing a statement of advice because it was not suggested that any of them were relevant.
Three obligations in relation to statements of advice are relevant: that the client be provided with a statement setting out the advice and the information about the bases on which the advice is or was given (s.947C(2)); that the ‘statements and information included in the statement of advice must be worded and presented in a clear, concise and effective manner’ (s.947C(6)); and where the advice recommends replacing one financial product with another, additional information such as charges relating to acquisition and disposal of the old and new products and any ‘significant consequences’ of taking the recommended action (s.947D(2)).
The second set of obligations concerns the obligation to act in the best interest of the client. Sections 961B and 961G are relevant in this matter.
Section 961B(1) and (2) of the Act relevantly provide:
(1)The provider must act in the best interests of the client in relation to the advice.
(2) The provider satisfies the duty in subsection (1), if the provider proves that the provider has done each of the following:
(a) identified the objectives, financial situation and needs of the client that were disclosed to the provider by the client through instructions;
(b) identified:
(i)the subject matter of the advice that has been sought by the client (whether explicitly or implicitly); and
(ii)the objectives, financial situation and needs of the client that would reasonably be considered as relevant to advice sought on that subject matter (the client’s relevant circumstances);
(c)   where it was reasonably apparent that information relating to client’s relevant circumstances was incomplete or inaccurate, made reasonable inquiries to obtain complete and accurate information;
(d) assessed whether the provider has the expertise required to provide the client advice on the subject matter sought and, if not, declined to provide the advice;
(e) if, in considering the subject matter of the advice sought, it would be reasonable to consider recommending a financial product:
(i)conducted a reasonable investigation into the financial products that might achieve those of the objectives and meet those of the needs of the client that would reasonably be considered as relevant to advice on that subject matter; and
(ii)assessed the information gathered in the investigation;
(f)    based on judgements in advising the client on the client’s relevant circumstances;
(g) taken any other step, at the time the advice is provided, would reasonably be regarded as being in the best interests of the client, given the client’s relevant circumstances.
Note:  The matters that must be proved under subsection (2) relate to the subject matter of the advice sought by the client and the circumstances of the client relevant to that subject matter (the client’s relevant circumstances). That subject matter and the client’s relevant circumstances may be broad or narrow, and so the subsection anticipates that a client may seek scaled advice and that the inquiries made by the provider will be tailored to the advice sought.
Section 961G provides:
The provider must only provide the advice to the client if it would be reasonable to conclude that the advice is appropriate to the client, had the provider satisfied the duty under section 961B to act in the best interests of the client.
Next, the Financial Planners Association of Australia (FPA) has published a Code of Professional Practice (Code) which the expert evidence in this matter described as reflecting minimum standards of behaviour for financial advisers’ and ‘provide a good reflection of the minimum standard of a financial adviser.’ The Code is not legally binding so far as Mr Betalli is concerned. The Code includes a process for providing financial advice referring to the steps as involving gathering information, identifying financial and lifestyle goals, identifying financial issue, preparing a financial plan, implementing the plan and reviewing and revising the plan at regular intervals.
Finally, ASIC has published ‘Regulatory Guide 98: ASICS powers to suspend, cancel and vary AFS licences and make banning orders’ (Regulatory Guideline 98). The Tribunal generally will have regard to publications like Regulatory Guideline 98 which record something of a policy approach to issues of the kind that arise here especially where the policy is not unlawful and there is no sound basis for departing from it in a particular case. In that regard, Regulatory Guideline 98 has been the subject of consideration and application by the Tribunal in banning order cases.
Regulatory Guideline 98 identifies that the primary purpose of making banning orders is to promote the objects of the financial services regime. The making of a banning order is designed to protect investors and consumers and to deter misconduct. The period for which a banning order operates is directed to deterring both the particular financial adviser or person on the receiving end of it as well as others from engaging in misconduct.
Regulatory Guideline 98 sets out what are described as ‘key factors’ that ASIC applies in deciding whether to make a banning order. Without being comprehensive some ‘key factors’ include whether conduct involved dishonesty, intentionally reckless or negligent features in the equation, as does personal benefit to a wrongdoer, in addition to, loss or detriment to others; whether timely and effective remedial steps have been taken; whether the person has been proactive in making changes to procedures and policies; and whether the person has been proactive in compensating losses and communicating the contravention to clients. It is not surprising that Regulatory Guideline 98 emphasises that ‘each case must depend on its particular circumstances and will be determined on a case-by-case basis.’
In this case because ASIC seeks a banning order for a period of three years, I should refer to the indicative factors in Regulatory Guideline 98 for a banning order for less than three years. Before doing so I should note that Regulatory Guideline 98 does not, appropriately so, identify prescribed periods beyond the range of less than three years, between three years and 10 years or for more than 10 years. Those wide ranging bands no doubt reflect the significant width of the circumstances that will accompany any particular case. Where within a particular range the conduct might fall is clearly dependent as the guideline reflects the particular assessment of particular facts and circumstances.
The factors identified in Regulatory Guideline 98 that are relevant to a period of less than three years are conduct that is the result of carelessness or inadvertence, attempts to remedy the contravention providing full co-operation with ASIC and no loss or minimal loss. Specifically, Regulatory Guideline 98 identifies mitigating factors as personal hardship should a banning order be made, whether the misconduct related to an isolated complaint and whether the misconduct was inadvertent and the person commits to change.
A factor relevant to an indicative banning order of more than three years but less than 10 years is ‘conduct [which] shows incompetence, irresponsibility, or a high level of carelessness, but with the possibility that the person may develop requisite skills and abilities’. The other factors identified in this range are far more egregious forms of conduct. The factors, a little unhelpfully, although entirely understandably, reflect the large span of years that are indicated in this range.
It is also necessary to briefly refer to the principles that apply to whether a banning order should be made and, if it is made, its duration. I will only briefly touch upon them because there was no issue about the principles that apply.[1]
[1] The principles are collected in HIH Insurance Limited (in prov liq) & Ors v Adler (2002) 42 ACSR 80 at [56]
Banning orders have the objective of protecting the public by amongst other things ensuring that the public can have confidence in financial advisors. They also serve to effect personal and specific deterrence; to deter the banned person, from contravening again, and general deterrence to deter the wider community of those engaged in the finance sector from engaging in contravening conduct. The kinds of factors that will be relevant in addition to specific and general deterrence include the loss sustained as a result of the conduct, contrition by the offender, the seriousness of the conduct, the offending persons past record, personal hardship, prejudice to a person’s business interests and assistance and co-operation with a regulator.[2] The need to consider these matters has ‘become part of a synthesis from which the [decision makers] make a value judgment concerning whether to order disqualification and, if so, the period of disqualification that should be imposed.’[3] Neither party suggested the position in respect of a banning order was or should be any different.
[2] Rich v Australian Investments and Securities Commission 2004 HCA 42 at [43]
[3] Ibid.
WHAT ARE THE ISSUES?
There was no issue that there is power to make a banning order. That was because Mr Betalli accepted that the circumstance in s.920A(1)(e) of the Act, that he had not complied with a financial services law, existed. The acceptance of the basis for power does not, naturally enough, resolve the matter because it is necessary to consider the particular circumstances in order to determine whether the discretion to make a banning order should be exercised and if so, what its duration should be.
It follows that the issues to be determined focus attention upon the issues in s.920A(1)(da), that that there is reason to believe Mr Betalli is not adequately trained or is not competent to provide financial services; in s.920A(e) so far as the actual circumstances of non-compliance with financial services laws are concerned; and in s.920A(1)(f) whether there is reason to believe that Mr Betalli is likely to contravene financial services laws in the future.
WHAT DID MR BETALLI DO?
Mr Betalli has worked as a financial advisor for about 15 years and has been registered as an Australian Financial Services Representative since 30 September 2009. He has qualifications which include a Diploma of Financial Services. Between 30 September 2009 and 28 September 2015, he was an authorised representative of Count Financial Limited (Count), and after that he was an authorised representative of HNW Planning Pty Ltd (HNW).
Mr Betalli conducts a business known as Betalli & Associates which as a registered tax agent provides taxation services and accounting services to clients. Associated with that business is another business known as The FP Business Pty Ltd (FP Business) which provides financial planning services to clients of Betalli & Associates. The provision of taxation and accounting services on the one hand, and financial planning services on the other hand are obviously related meaning knowledge acquired from taxation and accounting services is advantageous to clients who may also want financial planning services. Although there are others employed in both businesses, Mr Betalli is the only person authorised to provide financial services on behalf of FP Business although it employs an accountant who undertakes paraplanning and shares an administrator with Betalli & Associates. Mr Betalli also operates an equipment finance broking and mortgage broking business through the corporate vehicle, Corporate Financial Pty Ltd (Corporate Financial). All three business are conducted out of the same offices.
The origins of ASIC’s claim that Mr Betalli failed to comply with financial services laws, lay in its audit of eight client files that concerned the nine or so month period from about February to September 2018. The client files were attributed by the parties numbers from one to eight to preserve the confidentiality and privacy of each of the clients. The client files in many cases referred to couples, but a couple was treated as one client.
Each of the client files were subject to a comprehensive review by Mr Paul Green who is a Chartered Accountant and Certified Financial Planner. Mr Green’s expertise nor his conclusions were subject to challenge. Mr Green prepared a report dated 8 February 2023 that contained his analysis, opinions and conclusions (Green Report). In his evidence, Mr Betalli accepted the criticism of him that was made of him in the Green Report.
There is no dispute about Mr Betalli’s failures to conform to financial services laws. It is necessary to make some observations about the nature and extent of the failings because those things cast light on the issues concerning whether Mr Betalli is competent to provide financial services in the future and whether there is reason to believe he will contravene financial services laws in the future. They also focus attention on the circumstances relevant to the admitted contraventions which are relevant to the question of whether there should be banning order and if so how long it should operate for. I will focus attention upon what appear to be the most significant aspects of them. The matters I refer to in what follows are largely taken from ASIC’s case. I have not referred to each contention advanced, but have endeavoured to capture the substance of each of them because that is sufficient to judge the length and breadth of the omissions or failings and their relative seriousness.
The circumstances relevant to client one was that they were aged in their mid-50’s had a self-managed superannuation fund (SMSF) and wished to retire at 60 years of age. Their financial objectives were stated as settling on the sale of one property and exchanging on the purchase of another property. The statement of advice recommended that they establish a bare trust structure to allow for the future purchase of a geared property; that they proceed with the sale of the property that they had proposed; that they consolidate cash accounts in their SMSF; that they proceed with the purchase of the property they had already initiated and that they each make additional contributions of up to $25,000 per annum to ensure their SMSF was able to maintain ongoing fees and to provide for a cash buffer.
The omissions from the statement of advice were: there was no explanation of where the annual contribution of up to $25,000 each was coming from and there was no explanation about how the clients could repay the loan after retirement at 60 years of age when the property was negatively geared on a 25 year loan which required contributions to be positive throughout the period of the loan. Mr Betalli said in evidence that despite the fact find saying the clients wished to retire at 60 of age, that was wrong. That raised an issue about competence itself given that the fact find said something very different. It also raised questions about the failure to consider the clients retirement goals. Mr Betalli considered his error ‘was to implement a specific investment proposal put forward by the client themselves, rather than giving them full financial planning advice’; and that he ‘didn’t consider the goals and objectives of the client when I engaged in the work that I was asked to do’. The statement of advice did not reflect that Mr Betalli was providing limited scope advice, did not identify goals, options, and risks associated with different options and recommendations as between various options.

The Green Report identified the deficiencies in the statement of advice as the failure to give advice in the best interest of the client for the same reasons already referred to and added to them, the failure to identify the clients particular circumstances relevant to the client such as the concentration of their assets in residential real estate and their high level of private borrowings. The Green Report also identified a series of matters that informed the conclusion that the advice given was not ‘appropriate advice’; it was not in the best interests of the clients, it involved increasing the clients debt levels which was inappropriate given that they were close to retirement and that there was inadequate explanation and warning about risk.
The circumstances relevant to client two were that they were aged in their thirties, had two dependent children and another on the way and wanted to buy a commercial property. They had been clients of Mr Betalli for eight years. Mr Betalli said that his failing so far as this client was much the same as that which concerned client one; namely that he limited consideration of the advice he was giving to a specific proposal that the client had brought to him; in this case the proposal to purchase the commercial property. But there were other errors such as the inclusion of the words ‘proceed with the self-directed settlement of the sale of your existing investment property’ in the statement of advice in circumstances where the suggestion that they sell an existing investment property was never on the table. Further, the statement of advice included the words ‘Consolidate your SMSF cash accounts’ in circumstances where the clients did not then have a SMSF. Additionally, the statement of advice had not addressed the risk of borrowing from the bank on the basis of a 25 year term and then on lending those monies to a SMSF for a maximum term of 15 years.
The statement of advice did not address the changed circumstance that should have been very obvious with the impending arrival of the couple’s third child. Nor did Mr Betalli give any advice to the clients about leaving an appropriate balance in their existing superannuation fund before transferring it to a SMSF to meet existing insurance premiums given that the clients did not have an adequate level of insurance. Mr Betalli agreed the advice he gave was ‘woeful’. The advice also failed to account for the prospect of duplication of fees. There were other deficiencies concerning the proposal that the clients rollover their existing superannuation into a SMSF: there was no comparison of the advantages and disadvantages between the two, there was no identification of the costs involved, there was no advice about the loss of disability cover.
As to the failure to act in the best interests of the client the Green Report identified many matters that: there was no identification of financial position, goals, objectives and risk profiles were not identified; there was no identification of the clients personal circumstances especially so far as their exposure to real estate investment and their debt levels, and the failure to consider alternatives to what the client themselves were proposing. The Green Report also concluded that the advice was not appropriate because it failed to adequately explain and warn about the risks of purchasing with borrowings within the SMSF specific to their circumstances, and the risk of being responsible for repayment of debt and interest associated with the proposed purchase and rent to the SMSF. In particular, The Green Report did not consider the advice was appropriate because it should not have recommended any additional borrowing having regard to the clients personal circumstances, financial position, goals objectives and needs.
The third client couple were in their forties, had three dependent children and had an objective of purchasing more shares using their existing equity levers. The statement of advice recommended that they contribute $10,000 from their SMSF to their Macquarie Equity Lever account to purchase high growth assets and use gearing to purchase a further $225,000 of high growth assets and retain an amount of about $8000 as a strategic cash holding. This was in circumstances where the client had expressed a medium appetite for risk. Mr Betalli did not act in the clients best interest because he failed to identify the particular objectives and needs which motivated the requested advice to purchase more shares; failed to consider whether the course the clients wished to take was appropriate given their existing superannuation and other circumstances. In addition, the investment strategy involved a gearing ratio of 44% which was at odds with their stated medium appetite for risk. Again, the Green Report added that the advice was not in clients best interests because there was failure to identify existing expenses, goals, objectives, risk profile, personal circumstances (some of which were which were specifically identified) and no attempt to consider alternative proposals relevant to the client.
Further, the Green Report identified that the advice was not appropriate for the same reasons. The Green Report also said the advice was not appropriate because the advice increased the clients general leveraged and concentration risks that were already significant; did so in circumstances where the clients goals and objectives could be achieved without further risk; because the clients were not advised that the risks were unnecessary to achieve their goals; and because it was not appropriate to recommend additional investment in investment receipts given their personal circumstances and their existing exposure.
The fourth client were a married couple aged 58 and 63 years whose objective was to invest their superannuation balance in a geared investment and to replace insurance cover from their individual names to their SMSF. The statement of advice recommended that they invest about $100,000 in Macquarie Equity Lever and retain about $12,000 in their SMSF cash management account. The failure to act in the best interests of the client arose because the statement of advice said that the couple did not want assistance with insurance despite their stated objective of replacing their insurance. Mr Betalli said that the mistake about the need for insurance advice happened because an earlier fact find had not been updated. Further, their desire to invest in a geared investment was not the subject of any consideration by Mr Betalli specifically having regard to their existing superannuation and relevant circumstances. Mr Betalli acknowledged that it was ‘fairly elementary as a part of financial planning practice that, in order to give financial advice, you have to have an understanding of the client’s circumstances’ and that understanding is achieved ‘by completing forms like the fact find document.’ There was no explanation of risks associated with using gearing to purchase shares, there was no consideration of the clients existing or future income and expenses, goals or objectives, no identification of relevant personal circumstances and no consideration or advice given about other options that were available.
The advice was also not appropriate for the same reasons and because the statement of advice said the clients had a medium appetite for risk but also identified ‘their risk budget as 100% growth exposure or more with gearing.’ The Green Report identified significantly that the advice was not appropriate because the clients goals and objectives could be met without increasing their general, leveraged and concentration risks; it failed to provide an adequate explanation and warning about the risk, specifically having regard to the fact that the effect of the advice was that the clients would be borrowing money at higher interest rate for investment whilst leaving a like amount earning a lower rate of interest. It also was not appropriate for the clients to recommend additional investment in instalment receipts given the clients existing exposure and circumstances.
The fifth client were a married couple aged 48 and 54 years of age. Their stated objective was to obtain advice about life, total and partial impairment insurance through superannuation and trauma and income insurance outside of superannuation as well as to invest superannuation to grow investment through gearing. The advice was not in the best interests of the client because it did not identify the time frame and returns for the investment and inconsistently referred to the clients circumstances so far as risk was concerned. The Green Report again identified the failure to identify current and future expenses, goals objectives and risk profile as well as the clients personal circumstances. The advice was not appropriate because the advice did not reflect the clients risk profile, the appetite for risk was medium but the advice given was high risk. The Green Report also identified that again the advice increased the clients general, leveraged and concentration risk significantly where the clients goals and objectives could be achieved without doing so. The Green Report expressed the opinion that the clients were not provided with adequate explanation or warnings of risk especially that the risks need not have been taken to meet their goals and it was not appropriate to advise them to invest in instalment receipts given their circumstances and existing exposure.
The sixth client was a married man with two dependants whose objective was to invest his SMSF balance and to purchase more shares through his existing equity lever. The failure to act in the clients best interests arose because: the client was seeking superannuation and retirement planning where he wished to increase capital exposure to his existing equity lever using any excess balance whereas Mr Betalli failed to consider whether this was appropriate given the clients existing superannuation and circumstances; there was no consideration of whether the existing Macquarie Equity Lever was the appropriate product for the client; and again the risk was not appropriately considered given the clients medium appetite for risk and the later identification of the risk budget being ‘100% growth or more with existing gearing.’ The Green Report identified the failings as being whether the client had sufficient assets to achieve his financial goals without the risk of an investment strategy and already had significant exposure to leveraged instalment receipts as well as the clients lack of surplus income to meet instalment receipt payments as relevant failures.
The advice was not appropriate because of the disparity between the clients risk profile and the risk associated with the investment strategy. Again the Green Report identified the advice increased the clients increased general, leveraged and concentrated risks in circumstances where the clients goals and objectives could be achieved without the need to take those risks. The advice was inappropriate because the lack of explanation or warning about risk especially those that did not have to be taken and that it was not appropriate to recommend further investment to the clients instalment receipts given his personal circumstances and the level of his existing exposure.
The seventh client was a 52 year old single man with no dependants who sought to purchase a home through a SMSF. The statement of advice recommended that they establish a SMSF, open a Macquarie cash management account, purchase the property as an investment asset and invest the remainder of his superannuation funds in recommended portfolio through a Netwealth Accelerator Platform. The advice to rollover his then existing superannuation in Hostplus and First State Super did not include information that should have been included about the costs associated with the recommendation which compared the costs before and after. There was no real investigation of the situation and no consideration given to the clients retirement options and what the client would need upon retirement. There was no consideration of whether a SMSF was appropriate for the client.
The eighth client were a middle aged couple whose objective was to purchase a commercial property. The statement of advice recommended a bare trust to allow for the purchase of a geared investment property with $2 million to be funded from their SMSF cash balance and $1 million as a bank loan with the remaining cash invested in their SMSF in a recommended model portfolio using the Netwealth Accelerator platform and retaining $15,000 in cash. Again Mr Betalli did not give advice in the best interest of the client because he failed to consider, having regard that to the fact that the advice concerned superannuation and retirement planning, whether the advice was appropriate having regard to existing the clients superannuation and circumstances; failed to consider the respective advantages and disadvantages of purchasing the commercial property through superannuation and not through that means; failed to consider whether it was in the best interest of the client to purchase the commercial property at all; and failed to consider other products as against the Netwealth product.
The Green Report’s overall conclusion summarised the position in relation to the clients considered by Mr Green which was that Mr Betalli: did not act in the best interests of the clients; did not identify the subject matter or purpose of the advice, that is the objective the advice was seeking to achieve; did not identify the objectives, financial situation and needs of the client; did not take reasonable steps to obtain complete and accurate information upon which to provide advice; was not in a position to reasonably consider providing advice and did not properly assess the appropriateness of the financial product to the goals, objectives and needs of the client having regard to their personal circumstances and risk profile; did not base recommendations on the relevant circumstances including financial situation goals objectives and needs as well as risk profile; and failed to provide sufficient information to allow the clients to make an informed decision about the advice.
ASIC relied upon the repeated failings found in the eight client files as forming the foundation for the Tribunal having reason to believe that Mr Betalli is not competent to provide financial advice. Those ‘repeated failings’ concerned providing statements of advice that did not comply with financial laws, the giving of advice that was not in the best interest of the client or was not appropriate, especially so far as he advised clients to invest in high risk products that were not appropriate, he failed to advise clients about alternative investment and he failed to have regard to individual circumstances. The Green Report also referred to the minimum standards such as the FPA process that I referred to earlier. So far as ASIC said that the Tribunal should have reason to believe that Mr Betalli was not adequately trained, reference was made to his failure to keep adequate records when he worked for Count and his repeated use of an inappropriate disclaimer.
ASIC also relied upon repeated failings identified in the eight client files as grounding the satisfaction that I should have that there is reason to believe that Mr Betalli is likely to contravene financial services laws in the future. In this respect, it was said that that the number and frequency of historical omissions should satisfy me that there is reason to believe that there will be continued non-compliance in the future.
ANOTHER MATTER
Before dealing with what has changed since 2018, I should address one other matter that was relied upon by ASIC. That matter concerned a breach notice that was issued in June 2015 whilst Mr Betalli was an authorised representative of Count. That notice referred to Mr Betalli having failed to have kept adequate records and having provided non-compliant statements of advice. It also referred to the repeated use of inappropriate disclaimers.
There was no direct evidence that supported the things contained in the notice and ASIC’s whole case relied upon only that single document. As there was little advanced to support the contents of the document or to give any circumstance to what was ‘alleged’ in it. I do not think it is relevant to, or as Mr Betalli submitted probative of, the matters I am required to determine. To the extent that it might be relevant the observations I have made about what happened after 2018 are relevant to it.
WHAT’S HAPPENED SINCE 2018?
Mr Betalli referred in his evidence to a range of things that have changed since the conduct in 2018 happened. I will deal with these in turn.
First, Mr Betalli has undertaken further training which has included his recent completion of a Graduate Diploma in Financial Planning and his passing of the Financial Standards and Ethics Authority’s national adviser exam. His academic performance in his Graduate Diploma has been above average. In addition, albeit on one level of abstraction ‘only doing what he was required to do anyway’ Mr Betalli has undertaken his continuing education professional development obligations since 2018.
Second, Mr Betalli said that he no longer accepts work that does not involve full financial planning and he explains to all clients that he does not accept work on any other basis. It might be recalled that one reason that Mr Betalli considered that he got into trouble was because he too readily accepted work involving advice on a specific client generated proposal. His evidence about that did not in my assessment detract from his general concession about his contraventions, but rather sought to explain from where the contraventions emanated. He said in relation to those proposals that he advised upon that were brought to him by clients that ‘I aimed too much to please in areas that weren’t compliant’. When asked if he would do ‘exactly the same thing today’ he answered ‘No way. Not on your life. Not on mine either.’ Putting aside the fact that I accept his word about that, it is reinforced by his changed approach to accepting such work and the changed processes to which I will refer now.
Third, Mr Betalli explained the changed process that he now uses in providing financial planning advice to clients. That process now begins with providing ‘the client with the inflows and outflows of their personal expenses . . . assets and liabilities’ and seeking superannuation documentation at the same time if that is necessary. A fact find is then drafted with separate components that Mr Betalli ‘injects’ dealing with goals, objectives, scope and risk profiling. Mr Betalli personally conducts a newly introduced separate meeting with the client regarding risk profiling. The paraplanner then prepares in consultation with Mr Betalli the fact find. The document is then sent to the client for review. Mr Betalli frankly conceded that the process in 2018 treated the fact find as a ‘form filling exercise. It wasn’t treated with the weight that it needs to be treated at for the basis to get outcome in the statement of advice.’ Once the fact find is complete there follows ‘a full research process for alternative strategies, alternative product, (indistinct) . . . switching advice, making sure that the scope strategies align within the document to get the outcome that we required from a legislative point of view’.
Next, Mr Betalli prepares a statement of advice with the paraplanner. Mr Betalli was questioned about the use of templates, and when it was suggested to him that the template used for preparing the statement of advice did not start from scratch he said ‘I have to sort of disagree with that, because, if you go down the line of using the – if you don’t start from scratch, you end up with the same mistakes that you did in 2018.’ And later when asked: . . .the use of templates are that they provide, what, some kind of standard form text that’s appropriate but you insert particular bespoke information about the clients? Is that how it works?---I probably don’t agree with that because the standard/bespoke ends up back in the same problem as 2018. You have to actually write the statement of advice’. The process ends with a final review by Mr Betalli of the statement of advice.

Relevant to the revised process Mr Betalli also made clear in his evidence that he does not use the approach recommended by FPA. Mr Betalli considered that the approach he took is using what is known as the SMART goal setting method and ‘the other things we do’ were his preferred way of delivering financial planning services properly. It is to the point that the substance of the approach taken by Mr Betalli was not much different to what the FPA recommends.
Fourth, although it was submitted by Mr Betalli that it was relevant that there had been no contraventions identified since 2018, I am a cautious about the weight that should be given to this matter. I do not consider that it is of much relevance that there have been no ‘incidents’ or ‘no evidence that Mr Betalli has contravened financial services laws since 2018.’ There is really no evidence one way or the other about what has happened in the intervening period. As ASIC submitted the position would be quite different if there was evidence before the Tribunal that, say for example, an independent expert or financial planner had examined Mr Betalli’s work over that period and found no relevant contraventions or matters to complain about. Absent evidence of that kind, I do not consider there is much in the fact that nothing has come to attention since 2018.
Finally, it should not be forgotten that since 2018 a lot has happened to change the terrain for Mr Betalli including the fact of the delegates banning order and these proceedings. Having seen and heard Mr Betalli give evidence I am to consider this process has had a salutary effect upon him. Mr Betalli’s evidence, generally speaking, demonstrated that things like the changed procedure I referred to above are accompanied by a level of care and commitment to ensuring that he does not contravene financial services laws in the future. The significance of that should not be deprecated.
There is one other matter that I need to address which concerns ASIC’s reliance upon what were referred to in the proceedings as the ‘audit documents’. Those documents comprise of documents that were produced under summons that concerned audits of Mr Betalli’s work conducted by HNW for the period 2019 to 2022 in relation to twelve clients. The documents were relied upon by ASIC to support its submission that Mr Betalli’s assertions about his conduct and competence since 2018 were not supported by the documents or worse still, was contradicted by them and therefore those assertions should be given little or no weight. The assertions referred to included matters concerning that there had been ‘no indent’s’ since 2018, that ‘much has changed since 2018’, that Mr Betalli had implemented improved practices and processes, that Mr Betalli had demonstrated insight and there had been extensive remediation, and some assertions that are in the same category.
In relation to three of the audits they were conducted before any of the relevant changes that I have identified were implemented. In relation to one of the audits a document, a file note, was subsequently produced which answered the ‘fail’ noted on one item in an audit that produced and overall ‘pass’ in any event. In relation to a second audit another document was provided, this time a copy of a statement of advice that answered the concerns that had been raised at audit. Two further audits concerned statements of advice provided to ASIC during the course of its investigation about which no concerns were raised. Mr Betalli said that there had been a broader remediation process by him with HNW that involved issuing a new statement of advice to the clients. I will say a little more about remediation later.
INCOMPETENCE AND LIKELY FUTURE CONTRAVENTIONS
I am required to consider whether there is reason to believe that Mr Betalli is not adequately trained or is not competent to provide financial services and whether I have reason to believe that Mr Betalli is likely to contravene a financial services law.
I am unable to conclude that there is a reason to believe that Mr Betalli is not adequately trained and competent to provide financial services or is likely to contravene a financial services law. In this regard, whilst I accept that past conduct is generally a reliable indicator of future conduct the changes that have been implemented since 2018 are sufficient to dispel any basis for any reason to believe that Mr Betalli is not adequately trained, is not competent or will contravene a financial services law.
Further, after seeing Mr Betalli in the witness box, hearing and seeing him give evidence, it is very obvious that the process that he has been through including this hearing has served a very valuable role in alerting him to the need to take considerable care about the advice he provides in future.
SHOULD THERE BE A BANNING ORDER AND FOR HOW LONG?
There are two questions that need to be addressed: whether the discretion to make banning order should be exercised and if so, what should be the duration of any ban. There are a series of factors that are relevant to both of those issues.
First, there is no issue and nor could there be that the failings in this case did not involve dishonesty, whether, intentional or reckless. They did involve carelessness.
Second, the conduct is serious involving many failings over a range of obligations which gave rise to failures to act in the best interests of clients and to give appropriate advice, affecting eight clients out of a total of about 60 or 70 clients and over about a nine month period. The fact that the contraventions related to eight clients makes the conduct more egregious than if it affected only one but certainly that they were not contraventions affecting all clients. Again, it is relevant that the contraventions happened some time ago because of the things that have happened since but the mere fact that they happened a long time ago does not in my assessment mean they are any less serious.
Third, there is no evidence of financial loss to any of the clients. It was suggested that the fact that the clients did not complain was relevant. I am not persuaded that a lay persons lacking knowledge about regulatory obligations and contraventions of them is relevant. In the same way I am not persuaded that a client continuing business with a financial adviser who has engaged in contraventions of serious regulatory requirements is relevant to the making of a banning order and if it is the duration of such an order. There are a whole host of reasons that a client might remain loyal to a financial advisor not the least of which might be they simply do not know of departures from statutory norms or their seriousness.
Fourth, there was an acceptance of responsibility from an early time, about March 2021. Mr Betalli took ‘ownership’ of the contraventions from then.
Fifth, although it is less than thorough, there has been remediation. I say it has been less than clear mainly because the ‘remediated’ statements of advice do not indicate that that is what they are and may simply be new statements of advice that were generated in the course of business. Further, so far as remediation is concerned, six of the eight clients received updated statements of advice but significantly, those statements of advice did not on their face own up to the bad advice they had previously received. There was evidence, which I accept that at some stage, most probably after ASIC acted against Mr Betalli, he told most of the clients (at least one he could not locate) about the bad advice he had provided to them. I note ASIC made observations about the so called remediated statements of advice but with any direct evidence and any expert evidence about those observations I am not prepared to act on them.
Seventh, there was a level of co-operation with ASIC and in the matter before the Tribunal. Mr Betalli approached the matter based on a substantial acceptance of the facts and allegations relied upon by ASIC. Mr Betalli was an honest witness who assisted the Tribunal in understanding the circumstances of the contraventions and the other matters that were relevant to the case.
Eight, there was albeit belatedly, on the last day of the hearing, a reimbursement of the clients for the fees they had been charged together with a sum representing interest for the bad advice they received were provided. The lack of any explanation for why it took so long to reimburse the clients does, however, mitigates against the importance of this matter. I will say some more about it in a moment.
Ninth, although Mr Betalli demonstrated a significant level of contrition there were two matters, both highlighted by ASIC, that suggest some caution should be taken as they demonstrate something less than a full understanding of the wrongdoing involved on Mr Betalli’s part. The first concerns the late refund of fees to which I have referred already: it is unclear why it took till the end of the case for that to happen and it suggests at least some failing to properly understand and appreciate the consequences to the clients of the bad advice they received. The second matter is that Mr Betalli complained of ASIC’s publication about his failings without any real appreciation of the fact that the public are entitled to know. Both those things should be balanced against the fact that when confronted with the error of his ways in respect of both matters Mr Betalli fairly, and promptly, conceded that he should refund the money and that ASIC should be publishing information about what he did.
Tenth, I have referred to earlier the changes that Mr Betalli has implemented so far as giving advice is concerned, the employment of an additional person as a paraplanner, the new processes he has implemented and the additional training he has undertaken. I do not repeat those things here. Those changes are accompanied by what is in my assessment of Mr Betalli’s evidence a strong commitment to ensure the compliance with regulatory obligations in the future.
Eleventh, there has been some hardship already suffered by Mr Betalli most notably through the fact that he was unable to practice for about two months before the stay order was made and he has been subject to the attendant adverse consequences, namely the publication of media releases by ASIC and having been recorded on ASIC’s register of banned and disqualified people. The records remain publicly available.
In additional, Mr Betalli referred to the costs, stress and disruption caused by the process over the last there years. The distress that the whole episode has caused Mr Betalli was obvious from some aspects of his evidence. All of these things are a product of participation in a regulated profession but nonetheless it should be accepted that they have a personal deterrent effect. These things especially the two month period of the ban that was completed before the stay was granted, the publication of matters by ASIC and appearing on ASIC’s register of banned and disqualified are undoubtedly relevant to general deterrence as well as personal deterrence.
Twelfth, there is no doubt that a banning order will affect Mr Betalli’s business and cause some hardship, in all likelihood significant hardship. Some of the consequences which Mr Betalli referred to in his evidence lay in the domain of speculation especially because there is no finding of dishonesty, or anything like dishonesty or having done things motivated by personal gain. Nor could there be any such findings. There is no doubt that ban will have serious consequences: it will likely mean the immediate closure of the FP Business, at least for now, and potentially the same for Corporate Financial because of the withdrawal of institutional accreditations. It is probable that Mr Betalli will lose his membership of the SMSF Association. If the two businesses are unable to continue, Mr Betalli anticipates a staff member will need to be made redundant. The position so far as Mr Betalli’s registered tax agent status and his accounting practice are less certain and the prospects of them being affected are speculative. If they were to be shut down as well seven staff members would lose their jobs and there will be consequences for Mr Betalli personally.
In short, the consequences of making a banning order are likely to be significant but probably not as catastrophic as Mr Betalli anticipates. Mr Betalli referred also to some health conditions he suffered in 2018 which were a result of an adverse reaction to medication as being relevant to this issue but it was not advanced to excuse the 2018 conduct.
Finally, it should be apparent from my findings about whether there is reason to believe that Mr Betalli will contravene a financial services law and the matters articulated above that are personal to Mr Betalli that whilst personal deterrence has a role to play, it is not the most significant factor that needs to be considered in deciding whether to make a banning order and for what period.
It was submitted on behalf of Mr Betalli that ‘in order to make a banning order in this case, or to decline to set aside ASIC’s banning order this Tribunal would have to be satisfied in this case that the need for further general deterrence is so compelling that a ban must be imposed and outweighs the compelling subjecting circumstances set out in the evidence.’ I am not persuaded that that that is the approach I should adopt, but in any event, I do consider there is a compelling need for further general deterrence in this case which arises from the seriousness of the contraventions. A clear message needs to be sent to the community of financial advisers that serious consequences attach to a failure to conform to obligations like acting in the best interests of clients and giving appropriate advice. They are fundamental obligations upon which public trust and confidence in financial advisers is built.
In my assessment, the value judgment I am required to make must have regard to all of the relevant matters to which I have referred including personal and general deterrence and the need to promote public confidence in the financial services sector. I consider that having regard to those matters, consistently with Regulatory Guideline 98 a banning order should be made and it should be for a period of twelve months. In doing so I should indicate that the almost two months of the ban that occurred from 1 May 2021 to 23 June 21 should be taken into account so that Mr Betalli is prohibited from providing financial services until 24 April 2025.
DECISION
For these reasons the delegates decision is varied so that there will be a decision that Mr Betalli is prohibited from providing any financial services for a period of 12 months.

I certify that the preceding 81 (eighty-one) paragraphs are a true copy of the reasons for the decision herein of Mr Rob Reitano, Member

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Associate
Dated: 27 June 2024

Date(s) of hearing: 21 22 and 23 May 2024

Counsel for the Applicant: Mr N Beaumont SC and Mr D Blazer

Counsel for the Respondent: Mr P Knowles SC

[2024] AATA 2085

27 June 2024

Key Legal Topics

Areas of Law

Commercial Law

Administrative Law

Legal Concepts

Judicial Review

Procedural Fairness

Remedies

Statutory Construction

Date(s) of hearing:	21 22 and 23 May 2024
Counsel for the Applicant:	Mr N Beaumont SC and Mr D Blazer
Counsel for the Respondent:	Mr P Knowles SC