Blazejczyk and Australian Securities and Investments Commission
[2020] AATA 4352
•2 November 2020
Blazejczyk and Australian Securities and Investments Commission [2020] AATA 4352 (2 November 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2020/0222
Re:Wayne Blazejczyk
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Senior Member R Olding and Member P Ranson
Date:2 November 2020
Place:Perth
The decision under review is affirmed.
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Senior Member R Olding
CATCHWORDS
PROFESSIONAL SERVICES – financial services – banning order – where Applicant prohibited from provision of any financial services for five years – where Applicant accepted banning and prohibition period but sought to limit scope of banning to “personal advice” to “retail clients” – whether limited or permissive banning order appropriate – reviewable decision affirmed
LEGISLATION
Corporations Act 2001 (Cth) – ss 50, 766A, 910A 920A(1), 920B(2)
CASES
Blazejczyk and Australian Securities and Investment Commission [2020] AATA 3199 Comcare v Fiedler (2001) 115 FCR 328
SECONDARY MATERIALS
Australian Securities and Investments Commission, ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders (Regulatory Guide 98, 20 September 2018)
REASONS FOR DECISION
Senior Member R Olding and Member P Ranson
These reasons should be read with the Tribunal’s reasons published on 26 August 2020 (the earlier reasons).[1]
[1] Blazejczyk and Australian Securities and Investments Commission [2020] AATA 3199.
The Applicant, Mr Blazejczyk, applied to the Tribunal for review of the decision of the Australian Securities and Investments Commission (ASIC) under ss 920A(1) and 920B(2) of the Corporations Act 2001 (Cth) (the Corporations Act) to make a “banning order” prohibiting him from providing any “financial services” for a period of five years.
Mr Blazejczyk accepts he breached a “financial services law” and consequently ASIC’s power to make a banning order was enlivened. He does not challenge the five-year period of the banning order. Mr Blazejczyk’s sole ground of review was that the order should be limited to only prohibit him from providing “personal advice” to “retail clients”.
PROCEDURAL HISTORY
The Tribunal heard the application for review on 17 July 2020 and reserved its decision. In our deliberations following the hearing, we became concerned whether, notwithstanding Mr Blazejczyk’s concession, it would be appropriate to consider the scope of an appropriate order in isolation from the period of prohibition. We therefore made directions giving the parties the opportunity to make further submissions on the duration of the banning order. The directions also permitted the parties to make submissions on whether alternative orders, such as a general prohibition but permitting a particular class or classes of activities (referred to as a “permissive order”), would be appropriate.
At a directions hearing on 11 September 2020 convened at the request of ASIC, the question of whether ASIC should be permitted to re-open its case and make submissions regarding evidence that was before the original decision-maker, but on which the decision-maker made no findings, was raised. Mr Sharpe, who again appeared for Mr Blazejczyk, expressed concerns about the “practical justice” implications for Mr Blazejczyk arising from the delay that would inevitably flow from pursuing that course. Mr Sharpe reiterated Mr Blazejczyk was content to have the matter resolved on the basis the five-year period was not challenged but indicated Mr Blazejczyk would like to take up the opportunity afforded by the directions to make submissions on alternative orders, particularly as to whether a permissive order might be appropriate.
With agreement of the parties, we made further directions allowing Mr Blazejczyk time to make such submissions and for ASIC to respond. Both parties took up that opportunity and, helpfully, also set out why, by reference to authorities, it was appropriate for the Tribunal to act upon Mr Blazejczyk’s concession regarding the prohibition period. Mr Blazejczyk’s submissions also explicitly accepted ASIC’s contention the circumstances of the case fell within the category for which ASIC’s Regulatory Guide 98[2] indicates a prohibition period of three to ten years would usually be appropriate. Mr Blazejczyk’s submissions also formally conceded a five-year banning order was appropriate (subject to variation of the scope).
[2] Australian Securities and Investments Commission, ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders (Regulatory Guide 98, 20 September 2018).
Having raised the issue explicitly and given the parties - both of whom were represented by experienced counsel - an opportunity to make submissions, and particularly having regard to the concession regarding Regulatory Guide 98, we have no reason to doubt the concession is justified on the evidence before the Tribunal.[3]
[3] Comcare v Fiedler (2001) 115 FCR 328, [39].
Accordingly, we proceed as both parties have urged us, to consider only what would be the appropriate scope for a banning order of five years’ duration. Since ASIC maintains the correct and preferable decision is the general banning order it made, it is convenient to commence our consideration by summarising the alternative orders canvassed in Mr Blazejczyk’s submissions.
ALTERNATIVE ORDERS SOUGHT
Mr Blazejczyk maintained his primary position – that the order should be limited to banning “retail advice” to “retail clients” – but also set out alternative orders for consideration by the Tribunal. The potential orders canvassed in Mr Blazejczyk’s submissions are:
(a)an order limited to banning “retail advice” to “retail clients” (which would permit other advice to “wholesale clients”);
(b)an order limited to banning “retail advice” to any clients (which would permit other advice, but not retail advice, to retail or wholesale clients, thus excluding provision of advice to any of Mr Blazejczyk’s former clients);
(c)a permissive order, which Mr Blazejczyk submits would allow him to continue to carry out other financial services activities he was engaged in before the banning order was made, by permitting him to:
(i)be a member of the investment committee of any fund for which Bateau Asset Management Pty Ltd is the investment manager and to do all acts required for the due performance of that role;
(ii)engage in the promotion of any fund for which Bateau Asset Management Pty Ltd is the investment manager to holders of Australian Financial Services Licences and the licensees’ “representatives”, within the meaning of that term in s 910A of the Corporations Act, including for the purposes of encouraging licensees to include the fund or funds on the licensees’ Approved Products Lists;
(iii)to be a director of corporations that “carry on a financial services business” (within the meaning of the Corporations Act) or provide a “financial service” or “financial services” (within the meaning of s 766A of the Act) from time to time; as well as corporations that are “related” (within the meaning of s 50 of the Act) to such corporations;
and to do all acts required for the due performance of his duties as a director as well as all acts that promote and advance the interests of those corporations (subject to a condition prohibiting Mr Blazejczyk giving “retail advice” to “retail clients” while engaged in these activities).
For completeness, we note Mr Blazejczyk did not favour a hybrid order of the type raised in our earlier reasons, which might, for example, incorporate a limited or permissive banning order of five years’ duration with a shorter general ban, on the basis of the view expressed in his submissions it is uncertain whether the Tribunal is empowered to make such an order.
We consider below each of the types of orders canvassed on behalf of Mr Blazejczyk against the backdrop of the admitted breaches and the context for those breaches as summarised in our earlier reasons.
(a) order banning “retail advice” to “retail clients”
The difficulty with Mr Blazejczyk’s submissions, as we see it, is the admitted breaches demonstrated a failure to have proper regard to the requirements of the Corporations Act in relation to the provision of financial advice. The shortcomings leading to the findings of the breaches occurred in a particular context that might not arise for wholesale clients. However, acting in the best interests of clients and giving priority to their interests, which Mr Blazejczyk admits he failed to do, are directly relevant to activities that would be permitted under his proposed order. So too is careful attention to requirements for disclosure of remuneration and other personal interests, which Mr Blazejczyk also failed to do.
As ASIC submits, the protective objects of those requirements (set out in our earlier reasons) apply to the provision of all financial advice, not just retail advice to retail clients. It may be the need for measures promoting those objects could be perceived to be less acute in particular contexts, but nevertheless they are relevant to the purposes for which a banning order may be made, regardless of whether retail advice is to be provided to retail clients.
We are not satisfied a banning order of this kind would provide sufficient general deterrence. We acknowledge the risk the reputational damage of any banning order, especially one of five years’ duration prohibiting retail advice to retail clients, would provide a not insignificant degree of general deterrence. An order of this kind would, though, effectively send a message that licensees may still be permitted to provide advice to clients, albeit within a more limited field of operation, even if they fail to act in the best interests of, and prioritise the interests of, their clients, and to disclose remuneration and other interests in the prescribed way. That, in our view, would fail to promote professionalism and consumer confidence.
(b) order banning “retail advice” to any clients
We acknowledge, to the extent an order of this kind would prohibit retail advice to any clients, not just retail clients, it would have a stronger general deterrence factor than Mr Blazejczyk’s preferred order. But still the message to licensed persons would be: “even if you fail to act in the best interests of clients and prioritise their interests over your own, and fail to observe disclosure requirements, you will be permitted to continue to provide financial services.” As we consider that would provide insufficient general deterrence to promote the statutory objects, even substituting this more restrictive type of limited banning order would not, in our view, be the correct or preferable decision.
(c) permissive order
Being a member of an investment committee and promoting investment in a fund, as an order of this kind would permit, would allow Mr Blazejczyk to be involved in recommending and promoting investments, subject to the condition prohibiting retail advice to retail clients. This suffers from the same difficulties identified in relation to the proposed limited orders. So too would permitting Mr Blazejczyk to be a director of corporations (or related corporations) carrying on a financial services business or providing financial services subject only to that condition.
We are not satisfied a permissive banning order of this kind would satisfactorily promote the protective objects of the licensing regime. It would send a message that licensees who fail to act in the best interests of those to whom they provide advice, and fail to disclose remuneration arrangements and other interests as required, may still be permitted to be actively involved in the financial services industry (albeit in a more limited fashion). Such considerations would remain significant in the context of the activities that these proposed orders would permit.
In reaching our conclusions on each of the proposed orders, we have had full regard to the clear financial and other impacts of a general banning order as outlined in our earlier reasons. However, we consider these do not outweigh the failure of such orders to adequately address the protective objects of the licensing regime, by providing, in particular, sufficient general deterrence.
CONCLUSION
For the reasons outlined, if a banning order of five years’ duration is appropriate as both parties say, we are not satisfied that delineating the scope in any of the ways submitted by Mr Blazejczyk would satisfy the objects of the licensing regime. Balancing this consideration against the financial and other impacts on Mr Blazejczyk, we are satisfied a general banning order of the agreed duration is the correct and preferable decision.
Accordingly, we affirm the decision under review.
I certify that the preceding 20 (twenty) paragraphs are a true copy of the reasons for the decision herein of Senior Member R Olding and Member P Ranson.
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Associate
Dated: 2 November 2020
Date of hearing:
Date final submissions received:
17 July 2020
14 October 2020
Counsel for the Applicant:
Solicitors for the Applicant:
A K Sharpe
Roe Legal Services
Counsel for the Respondent:
K Anderson
Solicitors for the Respondent:
ASIC in-house legal representatives
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