Chong and Australian Securities and Investments Commission

Chong and Australian Securities and Investments Commission [2016] AATA 338 (26 May 2016)

Division

TAXATION & COMMERCIAL DIVISION

File Number(s)

2015/4866

Re

Alfie Chong

APPLICANT

And

Australian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal
Senior Member CR Walsh

Date 26 May 2016

Place Perth
The Tribunal affirms the decision under review.
.................[Sgd].......................................................
Senior Member CR Walsh
CATCHWORDS
CORPORATIONS – decision by Australian Securities and Investments Commission to make banning order prohibiting applicant from providing “financial services” for five years – whether power to impose a banning order enlivened – whether banning order should be imposed in the applicant’s case – period of banning order – decision under review affirmed
LEGISLATION
Australian Securities and Investments Commission Act 2001 – s 1(2)(a) – s 1(2)(b)
Corporations Act 2001 – s 761A – s 920A – s 920A(1) – s 920A(1)(e) – s 920B – s 945A – s 946A – s 946A(1) – s 946C – s 946C(1) – s 947 – s 947C(2) – s 947C(2)(b) – s 947C(2)(e) – s 947C(2)(f) – s 947C(3) – s 947D – s 1041H – s 1014H(1)
Corporations Regulations 2001 – r 7.7.10AE – r 7.7.10AE(3)
Trade Practices Act 1974 – s 52
CASES
Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682
ASIC v Adler (2002) 42 ACSR 74
ASIC v Maxwell [2006] NSWSC 1052
Australian Securities Commission v Nomura International PLC (1998) 29 ACSR 473
Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45
Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58
Felden and Australian Securities and Investments Commission (2003) 45 ACSR 111
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82
Howarth and Australian Securities and Investments Commission (ASIC), Re (2008) 101 ALD 602
JTMJ and Australian Securities Investment Commission, Re [2010] AATA 350
National Exchange Pty Ltd v ASIC [2004] FCAFC 90
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Story v National Companies and Securities Commission (1988) 6 ACLC 560
Taco Company of Australia Inc and ANOTHER v Taco Bell Pty Ltd and OTHERS (1982) 42 ALR 177
SECONDARY MATERIALS
Australian and Securities Investments Commission Regulatory Guide 98: Licensing: Administrative action against financial services providers – Table A – Table B
REASONS FOR DECISION
Senior Member CR Walsh
26 May 2016
INTRODUCTION

Mr Chong was an authorised representative of Meritum Financial Group Pty Ltd (Meritum), a financial services licensee, from:
· 16 September 2005 to 28 March 2006; and
· 20 July 2007 until 9 June 2014.
From 30 August 2007 until 1 September 2015, Mr Chong was the sole director of Moneywealth Financial Services Pty Ltd (Moneywealth). Moneywealth was an authorised representative of Meritum from 17 September 2007 and 9 June 2014.
On 4 September 2015, a delegate of the Australian Securities and Investments Commission (ASIC) decided to make an order under s 920A and s 920B of the Corporations Act 2001 (CorporationsAct) banning Mr Chong from providing “financial services” for five years (Decision).
In summary, in the Reason for Decision, accompanying the Decision (ASIC’s Reasons for Decision), ASIC found that ASIC’s power to make a banning order under s 920A(1)(e) of the Corporations Act was enlivened because Mr Chong had not complied with a “financial services law”.
More specifically, ASIC’s Reasons for Decision provide that Mr Chong contravened:
· section 1041H(1) of the Corporations Act, by cutting and pasting client signatures on to an Authority to Proceed (ATP) contained within a Statement of Advice (SOA);
· section 945A of the Corporations Act, by failing to have had a reasonable basis for advice in relation to advice provided to at least two of his clients;
· section 946A(1) of the Corporations Act by, on at least three occasions, failing to provide clients with a SOA;
· section 946C(1) of the Corporations Act, by failing give a number of his clients a SOA within the relevant statutory timeframe;
· section 947C(2) of the Corporations Act by failing, in relation to at least three of his clients, to fulfil the main requirements of a SOA in terms of the level of detail required by the section; and
· regulation 7.7.10AE(3) of the Corporations Regulations 2001 (Corporations Regulations), by failing, in relation to at least one of his clients, to give a statement that contains the information that would, if a SOA were to be given, be required to be in the SOA by virtue of s 947C(2)(e) and (f) of the Corporations Act.
ASIC’s Reasons for Decision also identify a number of additional “material” concerns about financial product advice given by Mr Chong and state that Mr Chong was:
not diligent in ensuring he maintained a level of professionalism and knowledge required of a financial adviser.
On 15 September 2015, Mr Chong applied to the Tribunal for a review of the Decision.
In summary, Mr Chong’s position, as set out in his Statement of Facts (received on 22 February 2016), is as follows:
I dispute the ASIC decision to ban me from providing financial services for the period 5 years, which was unfair, prejudice (sic.), harsh and unreasonable especially [as] (sic.) there was no client that have (sic.) suffered any financial loss or any intention to defraud or acted dishonestly.
The Tribunal view should consider the fact that our clients have not suffered any financial loss and the compliance matter regarding procedural have (sic.) now been rectified and for the past 18 months of intensive training that I have received from the New Dealer Group, which have provide me to be skilful and competent to handle the day to day compliance matter.
As stated, the file was individually audited and approved by the compliance officer before I can present to the client Statement of Advice.
ASIC has ignored and did not even consider the remedial action that I have undergone.
Therefore, we (sic.) seek the Tribunal to review the banning order from 5 years to 12 months undertaking.
ISSUES
The relevant issues for consideration by the Tribunal in this case are:
(i)whether the power in s 920A(1) of the Corporations Act to impose a banning order is enlivened; and
(ii) if yes, should a banning order be imposed in Mr Chong’s case; and
(iii) if yes, what the period of the banning order should be.
Each of these issues is addressed, in turn, below.
ANALYSIS
(i) ASIC’s power to make a banning order – s 920A(1) of the Corporations Act
Section 920A(1) of the Corporations Act states:
ASIC's power to make a banning order
(1)ASIC may make a banning order against a person, by giving written notice to the person, if:
(a)ASIC suspends or cancels an Australian financial services licence held by the person; or
(b)the person has not complied with their obligations under section 912A; or
(ba)ASIC has reason to believe that the person is likely to contravene their obligations under section 912A; or
(bb)the person becomes an insolvent under administration; or
(c)the person is convicted of fraud; or
(d)ASIC has reason to believe that the person is not of good fame or character; or
(da)ASIC has reason to believe that the person is not adequately trained, or is not competent, to provide a financial service or financial services; or
(e)the person has not complied with a financial services law; or
(f)ASIC has reason to believe that the person is likely to contravene a financial services law; or
(g)the person has been involved in the contravention of a financial services law by another person; or
(h)ASIC has reason to believe that the person is likely to become involved in the contravention of a financial services law by another person. [Emphasis added]
“Financial services law” is defined in s 761A of the Corporations Act as follows:
“financial services law” means:
(a)a provision of this Chapter [i.e. Chapter 7] or of Chapter 5C, 5D, 6, 6A, 6B, 6C or 6D; or
(b)a provision of Chapter 9 as it applies in relation to a provision referred to in paragraph (a); or
(c) a provision of Division 2 of Part 2 of the ASIC Act; or
(d)any other Commonwealth, State or Territory legislation that covers conduct relating to the provision of financial services; or
…………
Misleading or deceptive conduct - s 1041H(1) of the Corporations Act
Section 1041H of the Corporations, which provision is contained in Chapter 7 of the Corporations Act (and is therefore a “financial services law” for the purposes of s 761A of the Corporations Act), states:
Misleading or deceptive conduct (civil liability only)
(1)A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.
(2)The reference in subsection (1) to engaging in conduct in relation to a financial product includes (but is not limited to) any of the following:
(a) dealing in a financial product;
As Gleeson CJ noted in Fame Decorator Agencies Pty Ltd v Jeffries Industries Ltd (1998) 28 ACSR 58, the parliamentary history of this provision’s predecessor (being s 995 of the Corporations Law) shows that it was “inspired” by s 52 of the Trade Practices Act 1974 (TPA). Accordingly, much of the case law which has developed around s 52 of the TPA will apply also to s 1041H of the Corporations Act.
The word “conduct” is not defined in the Corporations Act for the purposes of s 1041H. However, s 1041H makes it clear that whatever form the relevant “conduct” takes, it must be “in relation to” a financial product and the person alleged to have breached s 1041H(1) must have been “engaged” in that conduct: JTMJ and Australian Securities Investment Commission, Re [2010] AATA 350 at [196]. In the context of s 1041H(1), the word “likely” has been held to mean “more probable than not”: Australian Securities Commission v Nomura International PLC (1998) 29 ACSR 473.
Further, the “conduct”, in the circumstances, must lead, or be capable of leading, a person into error; the test is objective and the fact finder must determine the question for itself: Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [10] per Gordon J, citing Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87 and 91. Although the test is objective, the attributes of the target audience are relevant, and once the relevant section (or sections) of the public, by reference to whom the question of whether conduct is (or is likely to be) misleading or deceptive falls to be tested is identified, then “the matter is to be considered by reference to all who come within it, including the astute and the gullible, the intelligent and the not so intelligent, the well-educated as well as the poorly educated, men and women of various ages pursuing a variety of vocations.”: ASIC v Maxwell [2006] NSWSC 1052; (2006) 59 ACSR 373 at [81] per Bereton J, quoting Taco Company of Australia Inc and ANOTHER v Taco Bell Pty Ltd and OTHERS (1982) 42 ALR 177.
The following propositions from Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45, relating to s 52 of the TPA, were accepted in National Exchange Pty Ltd v ASIC [2004] FCAFC 90; (2004) 22 ACLC 609 at 613-614 [18] by Dowsett J as being relevant to the application to s 1041H of the Corporations Act:
·     There must be a nexus between the conduct and any actual or anticipated misconception or deception;
·     Conduct will only be misleading or deceptive or likely to mislead or deceive if the representee labours under some erroneous assumption or may be expected so to labour. Such an assumption or anticipated assumption may be obvious, predictable or fanciful; and
·     The initial question which must be determined is whether the misconception or deception, alleged or anticipated, is properly attributable to an ordinary or reasonable member of the class.
Section 1041H of the Corporations Act is contravened even if the perpetrator acted honestly and reasonably and without intent to mislead or deceive and without negligence: ASIC v Maxwell at [81], citing Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 per Gibbs CJ.
Beck Chin Sim and Lai Wah Sim, as trustees of the BC & Law Sim Superannuation Fund
Mr Chong gave Beck Chin Sim and Lai Wah Sim, as trustees of the BC & Law Sim Superannuation Fund a SOA, dated 6 May 2011, recommending that the superannuation fund redeem $5,000 from the funds Macquarie Cash Management Account and invest $5,000 in Man OM-IP Global Limited (Man Global). Mr Richard Sim and Ms Florence Sims’ signatures purportedly appear on an ATP contained in the SOA. However, Mr Sim and Mrs Sim did not actually sign the ATP.
According to ASIC, Mr Chong “cut and pasted” Mr Sim and Mrs Sims’ signatures onto the ATP and the appearance of the clients’ signatures on the ATP was misleading as it indicated that Mr Sim and Mrs Sim had signed the ATP when, in fact, they had not. ASIC’s position is that cutting and pasting Mr Sim and Mrs Sims’ signatures onto the ATP was conduct in relation to a financial service that was misleading or deceptive or was likely to mislead or deceived, resulting in a failure by Mr Chong to comply with s 1041H(1) of the Corporations Act.
In his Closing Submissions, received on 10 May 2016, Mr Chong states the following in relation to the “cutting and pasting” incident:
1.ASIC do not have any substantiate (sic.) evidence to accuse me that I have breached the s 1014H(1) (sic.) and as per evidence provided to my findings:-
·The client in question did receive the SOA which was sent out to the client on the 16 May 2011 from my ex-staff with my signature on it.
·Copy of application investment $5,000 was signed from the client 28/04/2011.
“Annexure A”
·On the 26 May 2014 we contacted the client when the issue of cutting and pasting of signatures were highlighted, the client signed the acknowledgment and matters were dealt with and rectified with the client immediately. “Annexure A”
·There was no intention of any deceptive or misleading conducts (sic.) as stated in our letter to ASIC dated 27/05/2015. ASIC has not provided or substantiated evidence to prove that I copied and pasted the signatures. The client was fully aware of the initial investment of $5,000.
·The client has not suffered financial loss and made profit out of the initial investment of $5,000. Copy of document attached. “Annexure A”
·The client did not lodge any formal complaints and the matter was dealt with.
The ASIC findings were highly discriminatory.
Upon a fair review of a copy of the ATP in the SOA in question, it is clear that Mr Sim and Mrs Sims’ signatures were cut and pasted onto it. Without further evidence to the contrary, the Tribunal cannot ascertain who undertook the actual process of the cutting and pasting. However, the Tribunal notes that Mr Chong's signature is next to the "Adviser to sign" area. One might reasonably expect that, at the time Mr Chong signed the ATP, he would have been aware that Mr Sim and Mrs Sims’ signatures were cut and pasted onto it. Despite this, it appears that Mr Chong continued to proceed with signing the document, and thereby failed to comply with s 1041H(1) of the Corporations Act. It is significant that, in his evidence before the Tribunal, Mr Chong did not deny cutting and pasting the signatures into the ATP. Instead, he simply contended that there is no forensic evidence to prove that he did cut and paste the signatures and emphasized the fact that the “matter was resolved satisfactorily” with the client and that he only earned a fee of $200 from the client in respect of this matter (i.e. he did not profit from the incident). This does not change the fact that he failed to comply with s 1041H of the Corporations Act.
Requirement to have a reasonable basis for advice – s 945A of the Corporations Act
Section 945A of the Corporations Act, which provision was contained in Chapter 7 of the Corporations Act but which was repealed effective 1 July 2012 (but was a “financial services law” at the relevant time for the purposes of s 761A of the Corporations Act), stated:
Requirement to have a reasonable basis for advice
(1)[Where advice must be provided] The providing entity must only provide the advice to the a client if:
(a) the providing entity:
(i)determines the relevant personal circumstances in relation to giving the advice; and
(ii)makes reasonable inquiries in relation to those personal circumstances; and
(b)having regard to the information obtained from the client in relation to those personal circumstances, the providing entity has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all of the circumstances; and
(c)the advice is appropriate to the client, having regard to that consideration and investigation.
Peter Tat Kuen Ng & Teresa Yun Ha Lee Ng, trustees of the P & T Company SMSF
On 1 April 2011, Mr Chong recommended that Peter Tat Kuen Ng & Teresa Yun Ha Lee Ng, trustees of the P & T Company SMSF redeem all the investments held in its IOOF Portfolio account and reallocate the funds to other investments, namely, Premium China Fund, Platinum Asia Fund, Fidelity China Fund and Colonial First State Global Resources Fund, using a new MLC Wrap Investments account.
The substantive basis of Mr Chong's recommendation was that the four recommended fund managers were not available within the client’s existing IOOF account.
At the time the advice was given, the four funds were available within the client’s existing IOOF account. Accordingly, the availability of the four funds in the MLC platform was not a reasonable basis to switch to MLC, when they already existed in the IOOF platform.
Mr Chong failed to research the existing fund properly and therefore did not determine that the four funds were available from IOOF. Mr Chong failed to give reasonable consideration to the subject matter of the advice and failed to conduct reasonable investigations into the subject matter of the advice.
Charles Yim Cheong Yip
On 4 February 2013, Mr Charles Yim Cheong Yip sought advice from Mr Chong in respect of investment and wealth accumulation and insurance.
On about 5 February 2013, Mr Chong advised Mr Yip to apply for income protection insurance of $2,812 per month with MLC.
At the time, Mr Yip had income protection cover of $1,450 per month through his REST superannuation membership. This was a relevant personal circumstance in relation to giving the insurance advice.
Neither the Data Collection Form nor the SOA dated 15 March 2013 recording Mr Chong's advice refers to the existing income protection cover. In those circumstances, it appears Mr Chong failed to determine the relevant personal circumstances of Mr Yip in relation to giving the insurance advice in that he failed to determine that Mr Yip had existing income protection cover, or in the alternative, he failed to have regard to that existing insurance cover in providing advice to Mr Yip.
On 15 March 2013, Mr Chong recommended Mr Yip commence a gearing strategy and borrow $100,000 for investment using the Macquarie Flexi 100 Trust (Flexi 100).
Mr Yip was saving funds for a deposit on a home to purchase within three years. He wanted investments that showed steady growth and have minimal risk to his capital.
The gearing advice Mr Chong provided to Mr Yip was not appropriate having regard to Mr Yip’s personal circumstances, in that:
·     there was a risk that there would be no gain on the investment, which was inconsistent with Mr Yip’s objective being investments that shows steady growth;
·     there was a risk that the costs of Flexi 100 may exceed the gains and distributions at maturity and that Mr Yip would incur a loss on the investment, which was inconsistent with Yip’s objective that investments have minimal risk to his capital; and
·     the time-frame of the Flexi 100 investment was 3.5 years, which was not appropriate for meeting Mr Yip’s goal of saving for a home deposit within three years.
Obligation to give client a Statement of Advice – s 946A of the Corporations Act

Section 946A of the Corporations Act, which provision is contained in Chapter 7 of the Corporations Act (and is therefore a “financial services law” within the meaning of s 761A of the Corporations Act), states:
Obligation to give client a Statement of Advice
(1)The providing entity must give the client a Statement of Advice in accordance with this Subdivision and Subdivision D.
(2)       The Statement of Advice may be:
(a)       the means by which the advice is provided; or
(b)       a separate record of the advice.
“Statement of Advice” is defined in s 761A of the Corporations Act as follows:
“Statement of Advice” means a Statement of Advice required by section 946A to be given in accordance with Subdivisions C and D of Division 3 of Part 7.7
Albert Siew Lung Ho
On 11 May 2012, Mr Albert Siew Lung Ho applied for an MLC Wrap Super account.
There is no record on Mr Ho’s client file that Mr Chong gave Mr Ho an SOA in relation to the advice. It follows that Mr Chong thereby failed to comply with s 946A(1) of the Corporations Act in this regard.
Peter Tat Kuen Ng & Teresa Yun Ha Lee Ng, trustees of the P&T Company SMSF
On 16 January 2014, Mr Chong reviewed Mr Ng and Mrs Ngs’ superannuation and recommended that Mrs Ng’s interest in a GESB superannuation account be rolled over to the SMSF.
There is no record on the Mr Ng and Mrs Ngs’ client file that Mr Chong gave them an SOA in relation to the advice and thereby failed to comply with s 946A(1) of the Corporations Act in this regard.
Charles Yim Cheong Yip
On 24 June 2013, Mr Yip applied for an MLC Wrap Super account.
There is no record on Mr Yip’s client file that Mr Chong gave Mr Yip an SOA in relation to the advice and thereby failed to comply with s 946A(1) of the Corporations Act in this regard.
On 20 December 2013, Mr Yip applied for life insurance of $300,000 with MLC. Mr Chong provided the advice in his capacity as an authorised representative of Meritum and the advice was provided to Mr Yip as a retail client.
There is no record on Mr Yip’s client file that Mr Chong gave Mr Yip an SOA in relation to the advice and thereby failed to comply with s 946A(1) of the Corporations Act in this regard.
Timing of giving Statement of Advice – s 946C(1) of the Corporations Act
Section 946C of the Corporations Act, which provision is contained in Chapter 7 of the Corporations Act (and is therefore a “financial services law” within the meaning of s 761A of the Corporations Act), states:
Timing of giving Statement of Advice
General rule
(1)Subject to this section, if the Statement of Advice is not the means by which the advice is provided, the Statement of Advice must be given to the client when, or as soon as practicable after, the advice is provided and, in any event, before the providing entity provides the client with any further financial service that arises out of or is connected with that advice.
Statement of certain information if Statement of Advice not given when advice provided
(2)If the Statement of Advice is not given to the client when the advice is provided, the providing entity must, when the advice is provided, give the client a statement that contains the information that would be required to be in a Statement of Advice by paragraphs 947B(2)(d) and (e), or 947C(2)(e) and (f), as the case requires, and by section 947D, if applicable. [Emphasis added]
Section 947C(2) of the Corporations Act states:
Statement of Advice given by authorised representative--main requirements
(1)       This section applies if the providing entity is an authorised representative.
(2)Subject to subsection (3) and to the regulations (see subsection (4)), the Statement of Advice must include the following statements and information:
(a)       a statement setting out the advice; and
(b) information about the basis on which the advice is or was given; and
(c)a statement setting out the name and contact details of the providing entity; and
(d)       a statement:
(i)setting out the name and contact details of the authorising licensee, or of each of the authorising licensees; and
(ii)stating that the providing entity is the authorised representative of that licensee or those licensees; and
(e)information about the remuneration (including commission) or other benefits that any of the following is to receive that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice:
(i)        the providing entity;
(ii)       an employer of the providing entity;
(iii)      the authorising licensee, or any of the authorising licensees;
(iv)an employee or director of the authorising licensee, or of any of the authorising licensees;
(v)an associate of any of the above;
(vi)any other person in relation to whom the regulations require the information to be provided; and
(f)         information about:
(i)any other interests, whether pecuniary or not and whether direct or indirect, of the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or of any associate of any of those persons; and
(ii)any associations or relationships between the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or any associate of any of those persons, and the issuers of any financial products;
that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice; and
(g)       ……….
Taing Kim and Ah Nee Chua, as trustees of the C & Y Superannuation Fund
On about 11 April 2011, Mr Chong recommended that Mr Taing Kim and Ms Ah Nee Chuea, as trustees of the C & Y Superannuation Fund, switch $50,000 from the fund’s Navigator Cash Account into the Man Global.
Mr Chong gave Mr Kim and Ms Chua an SOA dated 10 May 2011 recording the advice.
As the SOA was not given to Mr Kim and Ms Chua when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give the trustees a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Mr Kim and Ms Chuas’ client file that Mr Chong gave Mr Kim and Ms Chua the statement required by s 946C(2) of the Corporations Act.
On about 11 April 2011, Mr Chong arranged for Mr Kim and Ms Chua to acquire 50,000 fully paid redeemable shares in Man Global. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give Mr Kim and Ms Chua an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided a further financial service that arose out of or was connected with that advice.
Mr Chong did not give Mr Kim and Ms Chua an SOA until 10 May 2011. There is no evidence that Mr Kim and Ms Chua expressly instructed Mr Chong that they required the further financial service immediately. As such, it appears that Mr Chong did not comply with s 946C(1) of the Corporations Act.
Belmiro Da Silva Jorge
In about June 2010, Mr Belmiro Da Silva Jorge sought Mr Chong's advice in relation to obtaining life and TPD cover of $1,000,000.
On about 10 June 2010, Mr Chong recommended to Mr Da Silva Jorge that he obtain the required insurance with ING OneCare.
Mr Chong gave Mr Da Silva Jorge an SOA dated 23 June 2010 recording the advice.
As the SOA was not given to Mr Da Silva Jorge when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give him a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Mr Da Silva Jorge’s client file that Mr Chong gave him the statement required by s 946C(2) of the Corporations Act and therefore it appears that Mr Chong did not comply with s 946C(2) of the Corporations Act in this regard.
On 15 June 2010, Mr Chong arranged for Mr Da Silva Jorge to apply for OneCare life and TPD cover. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give Mr Da Silva Jorge an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided him with a further financial service that arose out of or was connected with that advice. Mr Chong did not give Mr Da Silva Jorge an SOA until 23 June 2010 and thereby failed to comply with s 946A(1) of the Corporations Act.
Albert Siew Lung Ho
On 7 July 2011, Mr Chong recommended that Mr Albert Siew Lung Ho apply for $1,000,000 life and $10,000 income protection insurance cover with OnePath. Mr Chong gave Mr Ho an SOA dated 11 July 2011 recording the advice.
As the SOA was not given to Mr Ho when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give him a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Mr Ho’s client file that Mr Chong gave him the statement required by s 946C(2) of the Corporations Act and thereby Mr Chong failed to comply with s 946C(2) of the Corporations Act.
Donna Lange
On 29 August 2011, Mr Chong arranged for Ms Donna Lange to apply for the life and TPD insurance from OnePath that Mr Chong had recommended on 8 August 2011. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give Ms Lange an SOA when, or as soon as practicable after the advice was provided, and, in any event, before he provided her with a further financial service that arose out of or was connected with that advice.
Mr Chong did not give Ms Lange an SOA until after 31 August 2011, when the SOA was posted to her and thereby failed to comply with s 946C(1) of the Corporations Act.
FKK & GY Lim Superannuation Fund
On about 21 March 2011, Mr Chong recommended to the FKK & GY Lim Superannuation Fund (Lim Superannuation Fund) that the Lim Superannuation Fund sell down $10,000 from each of Advance (Wholesale) Imputation Fund and Colonial FS Wholesale Imputation Fund and invest $20,000 in Man Global.
Mr Chong gave the Lim Superannuation Fund an SOA dated 11 April 2011 recording the advice. As the SOA was not given to the Lim Superannuation Fund when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give the trustees a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on the Lim Superannuation Fund’s client file that Mr Chong gave the Lim Superannuation Fund the statement required by s 946C(2) of the Corporations Act, thereby it appears that Mr Chong failed to comply with s 946C(2) of the Corporations Act in this regard.
On about 29 March 2011, Mr Chong arranged for the Lim Superannuation Fund to withdraw $10,000 from each of the Advance (Wholesale) Imputation Fund and Colonial FS Wholesale Imputation Fund. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give the Lim Superannuation Fund an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided the client with a further financial service that arose out of or was connected with that advice.
Mr Chong did not give the Lim Superannuation Fund an SOA until 11 April 2011 and thereby failed to comply with s 946C(1) of the Corporations Act.
Peter Tat Kuen Ng & Teresa Yun Ha Lee Ng, trustees of the P&T Company SMF
On 1 April 2011, Mr Chong recommended that Mr Ng and Mrs Ng, as trustees of the P&T Company SMSF, redeem all of the SMSF’s investments in its IOOF Portfolio account and reallocate the funds to other investments using a new MLC Wrap Investments account. Mr Chong gave Mr Ng and Mrs Ng an SOA dated 20 April 2011 recording the advice.
As the SOA was not given to Mr Ng and Mrs Ng when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give the trustees a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Mr Ng and Mrs Ngs’ client file that Mr Chong gave Mr Ng and Mrs Ngs’ the statement required by s 946C(2) of the Corporations Act and thereby Mr Chong failed to comply with s 946C(2) of the Corporations Act.
On 1 April 2011 Mr Chong arranged for Mr Ng and Mrs Ng to apply for an MLC Wrap Investment account. On 1 April 2011 Mr Chong also arranged for Mr Ng and Mrs Ng to make a full withdrawal from their IOOF account. These were each a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give Mr Ng and Mrs Ng an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided the client with a further financial service that arose out of or was connected with that advice.
Mr Chong did not give Mr Ng and Mrs Ng an SOA until 20 April 2011 and thereby failed to comply with s 946C(1) of the Corporations Act.
MJ and Le Possingham Superannuation Fund
On 19 September 2011, Mr Chong provided financial product advice to the MJ and Le Possingham Superannuation Fund (Possingham Superannuation Fund) in respect of a Commonwealth Bank of Australia (CBA) Protected Loan.
On 21 November 2011, Mr Chong recommended that the Possingham Superannuation Fund buy BHP, WPL, NCM, WES and ANZ shares with the funds to be borrowed from the CBA under the Protected Loan.
Mr Chong gave the Possingham Superannuation Fund an SOA dated 10 January 2012 recording the advice.
As the SOA was not given to the Possingham Superannuation Fund when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give the trustees a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on the Possingham Superannuation Fund’s client file that Mr Chong gave the Possingham Superannuation Fund the statement required by s 946C(2) of the Corporations Act, thereby failing to comply with s 946C(2) of the Corporations Act.
On 19 September 2011, Mr Chong arranged for the Possingham Superannuation Fund to apply for a CBA Protected Loan. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give the Possingham Superannuation Fund an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided the client with a further financial service that arose out of or was connected with that advice.
Mr Chong did not give the Possingham Superannuation Fund an SOA until 10 January 2012 and thereby failed to comply with s 946C(1) of the Corporations Act.
Beck Chin Sim and Lai Wah Sim, as trustees of the BC & Law Sim Superannuation Fund
On about 28 April 2011, Mr Chong recommended to Mr Sim and Mrs Sim that the superannuation fund redeem $5,000 from the fund’s Macquarie Cash Management Trust Account and invest $5,000 into Man Global.
Mr Chong gave Mr Sim and Mrs Sim an SOA dated 6 May 2011 recording the advice. As the SOA was not given to Mr Sim and Mrs Sim when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give the trustees a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Mr Sim and Mrs Sims’ client file that Mr Chong gave Mr Sim and Mrs Sim the statement required by s 946C(2) of the Corporations Act and Mr Chong thereby failed to with s 946C(2) of the Corporations Act in this regard.
On about 28 April 2011, Mr Chong arranged for Mr Sim and Mrs Sim to acquire 5,000 fully paid redeemable shares in Man Global. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give the client an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided the client with a further financial service that arose out of or was connected with that advice.
Mr Chong did not give Mr Sim and Mrs Sim an SOA until 6 May 2011 at the earliest and thereby failed to comply with s 946C(1) of the Corporations Act.
Rosmund Sta Maria
On about 25 May 2011, Mr Chong recommended that Mr Rosmund Sta Maria commence a gearing strategy using a CBA Protected Loan and invest the money in shares.
Mr Chong gave Mr Sta Maria an SOA dated 12 July 2011 recording the advice.
As the SOA was not given to Mr Sta Maria when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give him a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Mr Sta Maria’s client file that Mr Chong gave him the statement required by s 946C(2) of the Corporations Act and thereby failed to comply with s 946C(2) of the Corporations Act.
On about 29 June 2011, Mr Chong arranged for Mr Sta Maria to apply for a CBA Protected Loan. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give Mr Sta Maria an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided the client with a further financial service that arose out of or was connected with that advice.
Mr Chong did not give Mr Sta Maria an SOA until 12 July 2011 at the earliest and thereby failed to comply with s 946C(1) of the Corporations Act.
Hardi Tanadi
On about 27 September 2010, Mr Chong recommended that Mr Hardi Tanadi replace his existing ING life insurance policy with a new Aviva policy. Mr Chong gave Mr Tanadi an SOA dated 1 October 2010 recording the advice.
As the SOA was not given to Mr Tanadi when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give him a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) and s 947D of the Corporations Act.
There is no record on Mr Tanadi’s client file that Mr Chong gave him the statement required by s 946C(2) of the Corporations Act and thereby failed to comply with s 946C(2) of the Corporations Act.
Beng Liong Tey
On about 11 August 2013, Mr Chong was asked by Mr Beng Liong Tey to give him an alternative quotation for life and income protection insurance then held by him with InsuranceLine.
On 11 August 2013, Mr Chong provided Mr Tey with a quote for Comminsure life insurance of $315,000 and income protection insurance of $3,090 to replace his existing insurances and recommended that he include TPD and trauma cover of $315,000.
Mr Chong gave Mr Tey an SOA dated 13 August 2013 setting out the advice.
As the SOA was not given to Mr Tey when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Mr Tey’s client file that Mr Chong gave him the statement required by s 946C(2) of the Corporations Act and Mr Chong thereby failed to comply with s 946C(2) of the Corporations Act.
Dagmar Toman

On 24 February 2011, Mr Chong met with Ms Dagmar Toman to discuss income protection insurance. Mr Chong recommended that Ms Toman take out an agreed value policy with a monthly benefit of $5,869 with MLC.
Ms Toman did not accept Mr Chong's recommendation and requested Mr Chong review the policy for a monthly benefit of $5,000.
On 2 March 2011, Mr Chong provided Ms Toman with quotes from AIA and OnePath for an income benefit of $5,000. Mr Chong recommended that Ms Toman apply for cover with OnePath.
Mr Chong gave Ms Toman an SOA dated 1 April 2011 setting out the advice.
As the SOA was not given to Ms Toman when the advice was provided, by virtue of s 946C(2) of the Corporations Act, Mr Chong was required, when the advice was provided, to give her a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Ms Toman’s client file that Mr Chong gave the statement required by s 946C(2) of the Corporations Act and thereby Mr Chong failed to comply with s 946C(2) of the Act.
On 18 March 2011 Mr Chong arranged for Ms Toman to apply for income protection insurance with OnePath and AIA. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s 946C(1) of the Corporations Act, Mr Chong was required to give Ms Toman an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided her with a further financial service that arose out of or was connected with that advice.
Mr Chong did not give Ms Toman an SOA until 8 April 2011 and thereby failed to comply with s 946C(1) of the Corporations Act.
Charles Yim Cheong Yip
On about 5 February 2013, Mr Chong recommended that Mr Yip apply for income protection insurance of $2,812 per month with MLC. Mr Chong gave Mr Yip an SOA dated 15 March 2013 recording the advice.
As the SOA was not given to Mr Yip when the advice was provided, by virtue of s 946C(2) of the Act, Mr Chong was required, when the advice was provided, to give him a statement containing the information that would be required in an SOA by s 947C(2)(e) and (f) of the Corporations Act.
There is no record on Mr Yip’s client file that Mr Chong gave him the statement required by s 946C(2) of the Corporations Act, such that Mr Chong did not comply with s 946C(2) of the Corporations Act.
On 5 February 2013, Mr Chong arranged for Mr Yip to apply for the income protection insurance with MLC that he had recommended. This was a further financial service arising out of the advice.
By virtue of s 946A(1) and s946C(1) of the Corporations Act, Mr Chong was required to give Mr Yip an SOA when, or as soon as practicable after the advice was provided, and, in any event, before Mr Chong provided him with a further financial service that arose out of or was connected with that advice.
Mr Chong did not give Mr Yip an SOA until at least 15 March 2013 and thereby failed to comply with s 946C(1) of the Corporations Act.
SOA given by authorised representative - main requirements - s 947C of the Corporations Act
Section 947C of the Corporations Act states:
Statement of Advice given by authorised representative--main requirements
(1)       This section applies if the providing entity is an authorised representative.
(2)Subject to subsection (3) and to the regulations (see subsection (4)), the Statement of Advice must include the following statements and information:
(a)       a statement setting out the advice; and
(b)information about the basis on which the advice is or was given; and
(c)a statement setting out the name and contact details of the providing entity; and
(d)       a statement
(i)setting out the name and contact details of the authorising licensee, or of each of the authorising licensees; and
(ii)stating that the providing entity is the authorised representative of that licensee or those licensees; and
(e)information about the remuneration (including commission) or other benefits that any of the following is to receive that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice:
(i)        the providing entity;
(ii)       an employer of the providing entity;
(iii)      the authorising licensee, or any of the authorising licensees;
(iv)an employee or director of the authorising licensee, or of any of the authorising licensees;
(v)       an associate of any of the above;
(vi)any other person in relation to whom the regulations require the information to be provided; and
(f)        information about:
(i)any other interests, whether pecuniary or not and whether direct or indirect, of the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or of any associate of any of those persons; and
(ii)any associations or relationships between the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or any associate of any of those persons, and the issuers of any financial products;
that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice; and
(g)if section 961H requires a warning to be given to the client in relation to the advice--a statement setting out, or recording, the warning required by that section; and
(h)       any other statements or information required by the regulations; and
(i)unless in accordance with the regulations, for information to be disclosed in accordance with paragraph (e) and subparagraph (f)(i), any amounts are to be stated in dollars.
(3)Subject to subsection (4), the level of detail about a matter that is required is such as a person would reasonably require for the purpose of deciding whether to act on the advice as a retail client.
……………….[Emphasis added]
Chee Hok Koo
On 10 January 2013, Mr Chong recommended that Mr Chee Hok Koo obtain $1 million of TPD cover with MLC in addition to the $1 million life insurance the client already had with MLC. Mr Chong recommended the TPD cover be for “any occupation” and that the premiums be funded from the superannuation fund of which he was a member.
Mr Chong gave Mr Koo an SOA dated 10 January 2013 recording the advice.
By virtue of s 947C(2)(b) of the Corporations Act, the SOA was required to include information about the basis on which the advice was given. By virtue of s 947C(3) of the Corporations Act, the level of detail about that matter that was required was such as a person would reasonable require for the purpose of deciding whether to act on the advice as a retail client.
The SOA did not contain sufficient information about the basis on which the advice was given in that there is no information in the SOA about:
·     what alternative insurance policies were considered;
·     the features of the recommended MLC insurance policy;
·     the advantages and disadvantages of the particular MLC insurance policy which was recommended;
·     the disadvantages of paying insurance premiums from his superannuation contributions; and
·     why the TPD insurance was for “any occupation” rather than “own occupation”.
Consequently, Mr Chong failed to comply with s 947C(2) of the Corporations Act.
Wenyi Liu
On 10 April 2014, Mr Chong recommended that Ms Wenyi Liu obtain life, TPD and Critical Illness insurance of $350,000 and more income protection insurance of $2,813 with MLC.
Mr Chong gave Ms Liu an SOA dated 10 April 2014 recording the advice.
By virtue of s 947C(2)(b) of the Corporations Act, the SOA was required to include information about the basis on which the advice was given. By virtue of s 947C(3) of the Corporations Act, the level of detail about that matter that was required was such as a person would reasonable required for the purpose of deciding whether to act on the advice as a retail client.
The SOA did not contain sufficient information about the basis on which the advice was given in that there is no information in the SOA about:
·     what alternative insurance policies were considered;
·     the features of the recommended MLC insurance policies;
·     the advantages and disadvantages of the particular MLC insurance policies which were recommended; and
·     how the recommended amounts of insurance were arrived at.
Consequently, Mr Chong failed to comply with s 947C(2) of the Corporations Act.
MJ and LE Possingham Superannuation Fund
On 19 September 2011, Mr Chong provided financial product advice to Possingham Superannuation Fund in respect of a CBA Protected Loan.
Mr Chong gave the Possingham Superannuation Fund a SOA dated 10 January 2012 recording the advice.
By virtue of s 947C(2)(b) of the Corporations Act, the SOA was required to include information about the basis on which the advice was given. By virtue of s 947C(3) of the Corporations Act, the level of detail about that matter that was required was such as a person would reasonable require for the purpose of deciding whether to act on the advice as a retail client.
The SOA did not contain sufficient information about the basis on which the advice was given in that there is no information in the SOA about:
·     why a gearing strategy was appropriate instead of the client's cash management account, including in light of the costs of the loan which were a $1000 establishment fee and a $20,605.69 protection premium;
·     the basis for recommending that 100% of the client's assets be invested in the gearing strategy; and
·     an explanation of the statement in the SOA that the investment options recommended spread the client's funds 'across the asset classes of cash, fixed interest investments, Australia shares, international shares and property', and that the client would obtain 'diversification to the various fund managers', when in fact all of the client's funds would be invested in Australian shares only as a result of the advice.
Accordingly, Mr Chong failed to comply with s 947C(2) of the Corporations Act.
Mr Chong’s position – failure to comply with s 946C and s 947C of the Corporations Act
In his Statement of Facts, received on 22 February 2016, Mr Chong states the following in relation to his repeated failure to comply with s 946C and s 947C of the Corporations Act:
On admission my understanding and full comprehension of the time critical issues was due to the lack of training, supervision and monitoring from my previous Dealer Group (Meritum Group).
I was caught under the ‘trap’ of a repetition of S946C and S947C SOA compliance issues. I was not alerted of my contravention in a timely manner and no action was undertaken by the previous Dealer Group under their compliance frame work during years following the initial client engagement.
As a direct result I unknowingly repeated the same contravention/mistake with subsequent client files. It is my belief an earlier breach report to ASIC would have resolved the fundamental legislative requirement. By not attending to their previous Dealer Group duties proactively my compliance processes did not improve during the period.
Similarly, in his Closing Submissions, received on 10 May 2016, Mr Chong states:
The failures and the admissions as per attachment (Media Report) clearly identified the weakness and flaws in Meritum Financial Group Compliance manuals and process. The responsibilities of the Auditors are partly to be blamed for not identifying my issues.
Situations in which SOA not required – reg 7.7.10AE of the Corporations Regulations
Regulation 7.7.10AE of the Corporations Regulations states:
Situations in which Statement of Advice not required
For paragraph 951C(1)(c) of the Act, Part 7.7 of the Act applies as if section 946B of the Act were omitted and the following section were substituted:
……………..
(3)At the same time or as soon as practicable after the further advice is given to the client, the client must be given a statement that contains the information that would, if a Statement of Advice were to be given, be required to be in the Statement by paragraphs 947B(2)(d) and (e), or 947C(2)(e) and (f), as the case requires, and by section 947D, if applicable.
(3A)The providing entity must keep a record of the further advice and, in doing so, must comply with any applicable requirements of regulations made for the purposes of this subsection.
Note 1:       Failure to comply with this subsection is an offence (see subsection 1311(1)).
Note 2:       For the client's right to a record of the advice, see subsections 942B(8) and 942C(8).
Note 3:       Subsections 947D(2) and (3) require additional information to be included in the record in certain circumstances.
Gerard Frederick Muir
Mr Chong prepared a Record of Advice (ROA), dated 20 January 2012, to Mr Gerard Frederick Muir that he replace his OnePath insurance policies issued by MLC.
By virtue of r 7.7.10AE(3) of the Corporation Regulations, Mr Chong was required, at the same time, or as soon as practicable after the advice was given to Mr Muir, to give him a statement that contains the information that would, if an SOA were to be given, be required to be in the SOA by s 947C(2)(e) and (f) of the Corporations Act.
The ROA indicates that a commission of $4,992 was payable to Moneywealth from MLC Life. This is information that would have been required in an SOA by s 947C(2)(e) of the Corporations Act. Accordingly, under r 7.7.10AE (3) of the Corporations Regulations, Mr Chong was required to give Mr Muir a statement containing that information.
There is no record on Mr Muir’s client file that the required statement was ever given to the client and thereby Mr Chong has not complied with r 7.7.10AE(3) of the Corporations Regulations.
Conclusion – ASIC’s power to make a banning order
It is clear from the above, that Mr Chong repeatedly failed to comply with more than one “financial services law”, as defined in s 761A of the Corporations Act and for the purposes of s 920A(1)(e) of the Corporations Act, such that jurisdiction to impose a banning order under s 920A of the Corporations Act is enlivened in Mr Chong’s case.
(ii) Whether a banning order should be imposed
Pursuant to s 1(2)(a) and (b) of the Australian Securities and Investments Commission Act 2001, ASIC (and the Tribunal standing in ASIC’s shoes) must strive to:
· maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy; and
· promote the confident and informed participation of investors and consumers in the financial system.
The objects of Chapter 7 of the Corporations Act, titled “Financial Services and Markets”, include:
· 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
· fairness, honesty and professionalism by those who provide financial services.
Table 1 of ASIC Regulatory Guide 98, titled “Licensing: Administrative action against financial services providers”, dated July 2013 (RG 98), identifies the following key factors ASIC considers in deciding whether or not to take administrative action against financial services providers:
·     Nature and seriousness of the suspected misconduct;
·     Internal controls;
·     Conduct after the alleged contravention occurs;
·     The expected level of public benefit;
·     Likelihood that: (i) the person’s or entity’s behaviour will change in response to a particular action; and (ii) the business community is generally deterred from similar conduct through greater awareness of its consequences; and
·     Mitigating factors.
In relation to the first factor, “Nature and seriousness of the suspected misconduct”, Table 1 of RG 98 identifies the following “relevant considerations”:
·     Whether there is evidence that the contravention involved dishonesty or was intentional, reckless or negligent
·     The amount of any benefit gained or detriment suffered as a result of the misconduct
·     The amount of loss caused to investors and consumers
·     The impact of the misconduct on the market, including potential loss of public confidence
·     Whether the conduct is continuing
·     Whether the misconduct indicates systematic compliance failures
·     Whether the licensee or person has a poor compliance record (e.g. they have previously engaged in the misconduct)
·     Conduct which may amount to a serious conflict of interest [Emphasis added]
The Tribunal considers that given the nature and seriousness of Mr Chong’s misconduct as a financial services provider, as detailed above (and, in particular, his failure to comply with s 1041H of the Corporations Act), ASIC was justified in taking the administrative action that it did (i.e. of imposing a banning order on Mr Chong of a substantial duration), noting, in particular, the relevant considerations in Table 1 of RG 98 which have been highlighted (bolded) above.
(iii) Period of banning order
Table 2 of RG 98 details factors and examples of conduct relating to specific periods of banning. The following “factors” are listed in relation the imposition of a banning period of “3-10 years”:
·     Conduct inconsistent with the orderly operation of a financial market
·     Adverse impact on confidence in or the integrity of a financial market
·     False, misleading or deceptive, or unconscionable conduct, or conduct with a lesser degree of dishonesty
·     A deliberate course of conduct to enrich themselves at others’ expense
·     Incompetence, irresponsibility or high level of carelessness, but with the possibility that the person may develop requisite skills and abilities
·     Disregard for the law and compliance with regulations.
Table 2 of RG 98 provides “examples” of conduct which are “indicative” of such factors., including, but not limited to:
· Misconduct in relation financial products or financial services (e.g. s 1041F-1041H and Div 2 of Pt of the Australian Securities and Investments Commissions Act 2001 (ASIC Act)
Based on the misconduct of Mr Chong in providing financial services, as set out above (noting, in particular, his contravention of s 1041H(1) of the Corporations Act), the Tribunal finds that the imposition of a banning order for a three to ten year period is appropriate in Mr Chong’s case. More specifically, the Tribunal finds that the imposition of a five year banning period is appropriate in the circumstances of Mr Chong’s case. In reaching this is finding, the Tribunal notes, in particular, the following:
·     the seriousness and duration of Mr Chong’s misconduct which cannot be characterised as simply “careless” or “inadvertent” (i.e. which would warrant a lesser banning period). Mr Chong’s conduct involved repeated/systemic compliance failures. Imposing a substantial banning order in such circumstances is likely to help participants in financial markets to better understand their obligations;
· the absence of any obvious remorse or insight shown by Mr Chong and the lack of insight displayed by Mr Chong to the consequences of his misconduct. Mr Chong has repeatedly tried to shift the blame for his own failure to comply with the Corporations Law (and, in particular, “financial services laws”) onto Meritum (refer to paragraphs 139 and 140 above) rather than taking responsibility for his own conduct as a financial services provider;
·     the importance of maintaining standards on the profession - a banning order protects the public from people like Mr Chong being involved in the financial services industry for the period of the order. A banning order may also have the effect of maintaining investor confidence in the financial industry: Felden and Australian Securities and Investments Commission (2003) 45 ACSR 111 at [398]. Members of the public are entitled to expect that those who fall short of minimum standards are removed from their profession for a period of time: Story v National Companies and Securities Commission (1988) 6 ACLC 560 at 581.
·     there is a strong protective effect for the public and reinforcement of the integrity and reputation of the financial services industry - It is well established that the purpose of a banning order is to protect members of the public from those who do not meet the standards of conduct expected of a person engaged in the provision of financial services: Howarth and Australian Securities and Investments Commission (ASIC), Re (2008) 101 ALD 602 at [152]-[180] per DP Forgie. A banning order is not made to punish a person even though punishment or the imposition of a penalty may be the practical outcome of such an order; and
· the errant behaviour of Mr Chong, and others committing like contraventions of the Corporations Act, is more likely to change for the better if Mr Chong is banned for a significant period of time. Deterrence is also relevant to the protection of the public: Howarth and Australian Securities and Investments Commission, Re (2008) 101 ALD 602 at [180] per DP Forgie. A banning order does not only provide deterrence to the person the subject of the order but also to others who are involved or might potentially become involved in the industry. A banning order may also have an educative effect on the person concerned and the industry at large. That is, it may inform other participants in the industry, including advisers and clients, that certain conduct is neither acceptable nor tolerated.
DECISION

For the above reasons, the Tribunal affirms the Decision.

I certify that the preceding 155 (one hundred and fifty-five) paragraphs are a true copy of the reasons for the decision herein of Senior Member CR Walsh
.............[Sgd]...........................................................
Administrative Assistant
Dated 26 May 2016

Date(s) of hearing

Date final submissions
received

23 March 2016

10 May 2016

Applicant In person

Counsel for the
Respondent

Solicitor for the
Respondent

Mr R Hooker

Mr N Goodstone

[2016] AATA 338

26 May 2016

Key Legal Topics

Areas of Law

Administrative Law

Commercial Law

Legal Concepts

Judicial Review

Jurisdiction

Procedural Fairness

Statutory Construction

Remedies

Penalty

Division	TAXATION & COMMERCIAL DIVISION
File Number(s)	2015/4866
Re	Alfie Chong
APPLICANT
And	Australian Securities and Investments Commission
RESPONDENT

Tribunal	Senior Member CR Walsh
Date	26 May 2016
Place	Perth