David Wilkins and Australian Securities and Investments Commission
[2014] AATA 748
•16 October 2014
[2014] AATA 748
Division GENERAL ADMINISTRATIVE DIVISION File Number
2014/4816
Re
David Wilkins
APPLICANT
And
Australian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal Deputy President P E Hack SC
Date 16 October 2014 Place Brisbane 1. The Tribunal ORDERS, pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth), that further implementation of the decision under review be stayed until the hearing and determination of the application or earlier order, upon the following conditions:
a. The applicant is permitted to be appointed as an authorised representative only of Wilkins Financial Planning Pty Ltd (licence number 448787);
b. The applicant is not to advertise financial services to any person;
c. Within 7 days, the applicant is to send a letter to all existing clients (being clients for whom the applicant presently provides financial services) in the form attached to this order and marked “A”;
d. Within 7 days of being appointed or retained as the financial advisor of any new clients (being clients for whom the applicant does not presently provide financial services), the applicant is to send a letter to the new clients in the form attached to this order and marked “A”;
e. If any person requests from the applicant a copy of ASIC’s delegate’s decision, the applicant is to provide same to that person within 7 days of the receipt of the request at no cost to the person making the request;
f. Insofar as the applicant provides financial services to any clients (existing or new), before giving any advice or making any recommendations the applicant must have the proposed advice and/or recommendations reviewed by a licensed financier advisor from any of the firms listed below to verify that the proposed advice and/or recommendations are appropriate for the client –
i. Ernst & Young
ii. KPMG
iii. PwC
iv. Deloitte
v. Pathways Compliance
vi. Catalyst Compliance
vii. Financial Services Consulting
viii. Patronus Compliance Solutions.
g. The applicant is not permitted to give advice or make any recommendation that the reviewing financial advisor considers to be inappropriate for the client.
h. The applicant is responsible for the reviewing financial advisor’s costs of and associated with the review.
i. Upon request, the applicant is to provide to the respondent such evidence as the respondent reasonably requires to demonstrate the applicant’s compliance with these conditions.
2. The Tribunal DIRECTS that:
a. The respondent is to lodge and serve any witness statements, expert reports and any other evidence on which he intends to rely at the hearing together with a Statement of Facts, Issues and Contentions by 4pm on
17 November 2014;b. The applicant is to lodge and serve any witness statements, expert reports and any other evidence on which he intends to rely at the hearing together with a Statement in Reply by 4pm on 15 December 2014;
c. The respondent is to lodge and serve any expert reports or witness statements on which he intends to rely upon in reply by 4pm on
5 January 2015;d. The matter be listed for a Conciliation Conference (1 day) in the week commencing 19 January 2015;
e. The parties are to advise the other which witnesses are required for cross examination by 4pm on 27 January 2015;
f. The parties are to lodge and serve a list of cases on which they intend to rely at the hearing by 4pm on 9 February 2015; and
g. The matter be listed for hearing (5 days) on 9 March 2015.
........................[Sgd]...........................................
Deputy President P E Hack SC
CATCHWORDS
PRACTICE & PROCEDURE – application for stay – applicant seeking stay of implementation of banning order – applicant prohibited from providing financial advice for a period of five years – whether public interest in banning order outweighs prejudice to applicant – stay granted subject to conditions
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) s 41(2)
Corporations Act 2001 (Cth) ss 920A, 1041H, s 945A
CASES
Australian Securities & Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130; [2009] FCAFC 185
REASONS FOR DECISION
Deputy President P E Hack SC
16 October 2014
The applicant, Mr David Wilkins, is a financial planner by occupation. By a decision made on 3 September 2014 a delegate of the respondent, the Australian Securities and Investments Commission, made an order pursuant to s 920A of the Corporations Act 2001 (Cth) banning Mr Wilkins from providing financial services for a period of five years. Mr Wilkins has made an application to the Tribunal for a review of that decision.
I am presently concerned with an application by him for a stay of the further implementation of that decision in reliance on the power in s 41(2) of the
Administrative Appeals Tribunal Act 1975(Cth) (the AAT Act). That section provides:
The Tribunal may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
Mr Wilkins submits that the effect of the banning order, if not stayed pending review, would be that his practice as a financial adviser would be ruined with, necessarily, consequent adverse effects on him and others within the business. He is prepared to abide by a condition that would confine him to giving advice in particular areas and not in others and a further condition requiring him to notify all his existing clients, and any prospective clients, of the fact of the banning order and to give those clients the opportunity to be provided with the Commission’s reasons for decision and a condition preventing him from giving advice on options trading.
The Commission opposes the application on the basis that the prospects of Mr Wilkins achieving an outcome in the Tribunal not involving a period of banning are minimal and that the public interest in the banning order remaining in place pending the outcome of the application outweighs any possible prejudice to him and his associates as a consequence of the ban in order.
It is neither possible nor desirable, on occasions such as this, to do more than examine briefly the factual background to the matter however some appreciation needs to be gained of the issues that will lead ultimately to be decided.
The conduct that led to the banning order arose out of the promotion by Mr Wilkins of a scheme for trading in options that he called the "Income Machine". The Commission's delegate concluded that Mr Wilkins had engaged in misleading or deceptive conduct in explaining the risk of options trading to his clients. In the present application the Commission points to written representations to the effect that the proposed strategy involved "a really low amount of risk" and to the conclusion of the delegate that options trading was a high risk investment strategy with the potential for unlimited losses. That view informed the conclusion that Mr Wilkins had breached s 1041H of the Corporations Act, which prohibits conduct that is misleading and deceptive or is likely to mislead or deceive, in his dealings with the affairs of three clients and in terms of a promotional flier distributed to clients and potential clients.
Next, the delegate concluded that Mr Wilkins had given investment advice that is not appropriate to five clients and, in so doing, had breached s 945A of the Corporations Act. That section required a person in the position of Mr Wilkins to provide advice that was appropriate to the client, having regard to an investigation and consideration of the client’s circumstances. Finally, it was concluded that Mr Wilkins had been involved, as the supervisor, in the conduct of an employee who had breached ss 945A and 1041H of the Corporations Act. The delegate concluded that Mr Wilkins had not complied with
s 945A of the Corporations Act on five occasions, had not complied with s 1041H of the Corporations Act on at least seven occasions and had been involved in his employees contraventions of those same sections. That conclusion enlivened the discretion in
s 920A of the Corporations Act to make a banning order.
The submissions of the Commission make reference to the decision of the Full Court in Australian Securities & Investments Commission v Administrative Appeals Tribunal.[1] That case stands as authority for the proposition that the exercise of the power in s 41(2) of the AAT Act is contingent upon the Tribunal having formed the opinion that the making of an order under the subsection,
[1](2009) 181 FCR 130; [2009] FCAFC 185.
is desirable… taking into account the interests of any person who may be affected by the review.[2]
[2]At [49] per Downes and Jagot JJ.
Justices Downes and Jagot said of the exercise of the s 41(2) power:[3]
[C]areful consideration … must be given by the AAT in any exercise of power under
s 41(2) of the AAT Act to the balance of competing rights and interests struck by Parliament as embodied in the terms of the Corporations Act, particularly the balance between the rights and interests of the recipient of the banning order and of the public including existing and potential future clients of the recipient of the banning order. As we have said the scheme which the provisions of the Corporations Act embody – with the potential making of a banning order to remain private unless and until ASIC decides to make such an order after having given the recipient an opportunity to be heard – is not mere statutory background or a neutral factor in the process of the formation of the required opinion about what is desirable under s 41(2) of the AAT Act. The scheme which Parliament has established in the Corporations Act, and the public interest in the right of the market to know relevant information as soon as practicable, must be treated as a fundamental element in the decision-making process required under s 41(2) of the
AAT Act.
The Commission points to the objects of Chapter 7 of the Corporations Act, within which s 920A is located, which include "confident and informed decision-making by consumers of financial products".
[3]At [71].
The Commission submits[4] that the following factors are relevant to the question of whether a stay ought be granted:
(a)the public interest/the consequences for ASIC in carrying out its functions under the corporations legislation if the orders were, or were not, granted;
(b)the consequences for the applicant if the orders were, or were not, granted;
(c)the prospects of success or merits of the review application;
(d)any conditions that could be imposed and which would ameliorate any consequences of either granting or refusing a stay.
I am content to proceed on that basis.
[4]Exhibit 4 at paragraph 30.
Much of the Commission's focus derives from the observations of Downes and Jagot JJ set out in paragraph 8 above and from their Honours’ observations at [54] of the reasons for judgement that information is the key to effective trading in any market. But those observations need to be understood in the context in which they were made. The case was one involving a banning order. The Tribunal had granted the stay, including orders preventing the entry of the banning decision in the Register maintained by the Commission and the publication of the decision in the Gazette and in any media release, and had additionally made orders that the identity of the person banned be protected by the use of a pseudonym, the hearing take place in private and the disclosure of documents lodged be restricted. In such circumstances it is understandable that their Honours were troubled by a lack of information in the marketplace.
The present case is quite different. No confidentiality orders are sought and publication in the Register and the Gazette has already taken place. No order is sought, or could be sought, in relation to those steps. In those circumstances I cannot see how there are any adverse consequences to the Commission from the granting of a stay. It has discharged its statutory functions. Mr Wilkins now seeks to take advantage of his right to seek a review of the decision and seeks the exercise of the discretion reposed in the Tribunal to stay the implementation, or in this case the further implementation, of the Commission's decision. If, ultimately, it is decided that the Commission's decision should be affirmed the period of the banning order will re-commence from the date of effect of that decision.
Moreover the public interest in full and complete information in the marketplace is, in my view, adequately catered for by the proposed condition that would require
Mr Wilkins to notify his existing clients, and any prospective clients, of the fact of the banning order having been made and requiring him to make available to them a copy of the delegate’s reasons for making the order if requested. It gives proper effect to the "fundamental element" in the s 41(2) decision making process.
The evidence from Mr Wilkins about the effects on him and those around him if the stay were not granted is somewhat thin however it takes little imagination to appreciate that significant harm might be done to Mr Wilkins’ economic interests, and that of his business, were a stay not to be granted. Even with the cooperation of the parties it is unlikely that this matter could come on for hearing until the New Year with the result that, absent a stay, Mr Wilkins would be prevented from pursuing his occupation for a period of at least six months.
In support of the stay Mr Wilkins argued that the approach of the delegate concerning the alleged breaches of s 1041H had focused upon isolated representations, rather than the totality of information provided to clients. His case, as I apprehended it, is that when the advice is considered in context it is not misleading or deceptive. In relation to the issue of inappropriate advice in at least one example he points to expert evidence available to him that, if accepted, would rebut the conclusion that inappropriate advice was given. Additionally, he points to many other instances where particular clients were well satisfied with the advice given to them. I am yet to be persuaded that such evidence is relevant however I need not reach a concluded view. As to the finding of a breach by a failure as supervisor, he raises an argument that he was not knowingly concerned in the breach by the subordinate.
As it seems to me Mr Wilkins has demonstrated that he has at least an arguable case. It is not possible to say more at this stage about his prospects. There are questions of fact and law that will need to be resolved. The issues of misleading and deceptive conduct and of inappropriate advice will require a detailed examination of all of the circumstances. The present is not the occasion for that examination.
Finally, on the question of conditions, mention has already been made of the condition requiring the fact of the banning order to be made known to existing and potential clients. Additionally Mr Wilkins proffers a condition that he will not provide advice to clients about options trading and will limit advice to what is described as "traditional risk averse, conservative planning".
On the view I take of the matter the proper exercise of discretion requires the grant of a stay but subject to the two conditions to which reference has been made. I propose to formulate the precise terms of those conditions in consultation with the parties and to make directions with a view to bringing the matter on for hearing as soon as possible.
Having published the foregoing to the parties I was provided with a draft agreed between the parties of conditions that Mr Wilkins was prepared to accept. They go somewhat further than I had been intending to require of him however given his agreement the stay will be made subject to them.
I certify that the preceding
18 (eighteen) paragraphs are a
true copy of the reasons for
the decision herein of
Deputy President P E Hack SC........................[Sgd].........................................
Associate
Dated 16 October 2014
Date of hearing 14 October 2014 Solicitors for the Applicant AG Edwards Legal and Compliance Counsel for the Respondent Ms Hindman Solicitors for the Respondent Australian Securities and Investments Commission
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