EDWARD WILLIAM EIKELBOOM and AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
[2009] AATA 474
•19 June 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 474
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/0354
GENERAL ADMINISTRATIVE DIVISION ) Re EDWARD WILLIAM EIKELBOOM Applicant
And
AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Respondent
DECISION
Tribunal The Hon Robert Nicholson, Deputy President Date19 June 2009
PlacePerth
Decision The decision under review dated 19 December 2007 be varied by substituting ‘two years’ for ‘three years’ and otherwise be affirmed. ....... (sgd) Hon Robert Nicholson............
Deputy President
CATCHWORDS
Corporations law – financial services law - application for review of banning order – applicant acting as authorised representative – ban imposed for three years – applicant found to have failed to comply with financial services law in not providing advice which was reasonable and appropriate in the circumstances– banning order appropriate – no finding applicant would not comply in the future – consideration of factors in regulatory guide 98 – order imposed for 2 years.
LEGISLATION
Corporations Act 2001 para 920A(1)(f), s 920B
Financial Services Reform Act 2001
CASES
Coakley v ASIC [2008] AATA 247
Farley v Australian Securities Commission (1998) 16 ACLC 1502, 1521
Rich v Australian Securities and Investments Commission (2004) 220 CLR 129
Story v National Companies and Securities Commission (1988) 6 ACLC 560, 581
Re HIH Insurance Limited (In Prov Liq) and HIH Casualty and General Insurance Limited (In Prov Liq); Australian Securities and Investments Commission v Adler & Ors (2002) 42 ACSR 80, 97-99REASONS FOR DECISION
19 June 2009 The Hon Robert Nicholson, Deputy President 1. The applicant seeks review of a decision of the respondent made on 19 December 2007. The decision was that under paragraph 920A(1)(f) and s 920B of the Corporations Act 2001 (Cth) (‘the Act’) the respondent prohibits the applicant from providing any financial services for a period of three years. The decision took effect from service of it on the applicant, which occurred on 4 January 2008.
2. The application for review was lodged with the Tribunal on 25 January 2008. For various reasons, it first came on for hearing on 10 March 2009, by which time the ban had been in effect for over one year. It is not contended that even if the application is successful, a further decision can undo the effect of the ban while the decision of the respondent continues in effect.
Statutory Context
3. The Financial Services Reform Act 2001 (Cth) came into effect on 11 March 2002. It brought into effect ‘a new licensing regime for persons providing financial services to members of the public in respect to the purchase and sale of securities under the Act: Coakley v ASIC [2008] AATA 247 at par 9 per Deputy President Walker. It provided for a new form of licence described as an Australian financial service licence: S 911A of the Act. The parties contend that the issues arising for decision nevertheless require consideration of the issues raised by the present law and that it is not necessary to consider the former law for the purposes of the resolution of the application for review.
4. The banning or disqualification of persons from providing financial services is now dealt with in Division 8 of Part 7.6 of Chapter 7 of the Act which contains provisions on ‘Financial Services and Markets.’ Section 920A(1) relevantly reads:
‘(1) ASIC may make a banning order against a person, by giving written notice to the person, if:
………………..
(e) the person has not complied with a financial services law; or
(f) ASIC has reason to believe that the person will not comply with a financial services law.’
Section 920B empowers the making of a banning order either permanently or for a specified period.
A banning order may only be made after ASIC has given to the person against whom the order may be made an opportunity to appear and make submissions. Compliance with this requirement is not in issue here.
The description ‘financial services law’ is defined by s 761A and it is not disputed that it requirements are met here.
The provisions which the decision-maker considered the applicant may not comply with in the future are ss 945A and 1041H. The former provides:
945A (1) The providing entity must only provide the advice to the 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
(b)having regard to 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.
(c)the advice is appropriate to the client, having regard to that consideration and investigation.
(2) ….
(3) A financial services licensee must take reasonable steps to ensure that an authorised representative of the licensee complies with subsection (1).
Section 944A provides that the reference to ‘providing entity’ includes a reference to a person in their capacity as authorised representative of a financial services licensee. It is common ground that the applicant relevantly acted at all times as an authorised representative.
The second section (s 1041H) provides in subsection (1) that:
‘ 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.’
This section has not been relied upon for either party in the hearing before the Tribunal.
5. The respondent has published in April 2006 (updated in February 2008) Regulatory Guide 98 titled ‘Licensing: Administrative action against financial services providers’. In Table 2 ‘Factors and examples of conduct relating to specific periods of banning’ are set out. Factors are said to be indicative only. In relation to banning for 3-10 years the following factors are set out:
·A significant loss
·A deliberate course of conduct to enrich themselves at others’ expense but with a lesser degree of dishonesty
·Incompetence and irresponsibility but with the possibility that the person may develop requisite skills and abilities
·Continued, knowing and wilful contraventions of the law and disregard of legal obligations
These factors are in contrast with those relating to banning for under 3 years, which are:
·Some loss to client, but as a result of carelessness or inadvertence rather than dishonesty
·Has attempted to remedy the contravention and person has fully cooperated with ASIC
·No previous contraventions
·Indications of clear intention to comply with legal obligations by demonstrated behaviour
6. The effect of decided authorities has been summarised by Deputy President Walker in Coakley v Martin as follows:
The principles to be applied in this context are expressed in several cases and largely reproduced in regulatory guide 98. In Farley v Australian Securities Commission (1998) 16 ACLC 1502, 1521, the purpose of a banning order was stated to be preventive rather than punitive in nature and having the purpose of removing a possible threat to the public interest and to public confident in the securities industry by excluding that person from participating in it.
The High Court in Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 held that while imposing a disqualification order under the Act was intended to be preventive, its effect once imposed was also punitive (at [37] and [52]).
On the other hand, in Story v National Companies and Securities Commission (1988) 6 ACLC 560, 581, Young J pointed out that there is a public interest that people should be permitted to follow a trade or profession that they are qualified to engage in. But the public also expects that those who fall short of the profession’s minimum standards should be removed from it, at least until the regulatory body can be assured that they are able to perform their functions efficiently.
Santow J in Re HIH Insurance Limited (In Prov Liq) and HIH Casualty and General Insurance Limited (In Prov Liq); Australian Securities and Investments Commission v Adler & Ors (2002) 42 ACSR 80, 97-99, usefully summarised the principles governing banning and disqualification orders and set out the principles applying to the assessment of an appropriate length of prohibition. The scales of responsibility that his Honour identified are paralleled in regulatory guide 98, table 2, although not exactly. For these purposes I think regulatory guide 98 should be treated as the appropriate standard.
Likewise I propose to proceed on the basis that regulatory guide 98 sets the appropriate standard.
The Applicant
7. From 27 November 2001 to 1 September 2003 the applicant was the holder of a proper authority issued by Brighton Hall Securities (“Brighton Hall”) a licensed securities dealer.
From 1 September 2003 to 12 September 2003 the applicant was an authorised representative of Brighton Hall, a holder of Australian financial services licence number 229169.
From 22 September 2003 to 9 May 2006 the applicant was an authorised representative of EAS (WA) Pty Ltd (‘EAS’), a holder of Australian financial services licence number 227748.
From 18 May 2006 the applicant has been an authorised representative of Futuro Financial Services Pty Ltd, a holder of Australian financial services licence number 238478.
At all relevant times the applicant was not a licensed securities dealer or a holder of an Australian financial services licence.
8. At various times the applicant recommended 9 client investments in the following:
(a) York Street Mezzanine Promissory Notes;
(b) Market Street Mezzanine Promissory Notes; and
(c) Market Street Mezzanine Notes.
As a result of the above recommendations the applicant earned $45,559 in commissions.
The applicant’s giving of financial advice to Mr Harington
The nature of the investor
9. Around 19 August 2002 Mr Harington sought investment advice from the applicant.
At the time:
(a) Mr Harington was 71 years old, single and semi-retired;
(b) He was the owner-operator of a garden nursery;
(c)His only formal qualifications were those obtained on completing high school and a Diploma of Agriculture;
(d) He owned his home outright;
(e)His total net assets (including home) had a value of approximately $545,000 and total net assets (excluding home) had a value of approximately $195,000;
(f) His investment experience was limited;
(g) He considered himself to be a “conservative” investor; and
(h)He wanted to invest his money in ways that would provide him with an income, to complement what he earned from the nursery, to cover his living expenses.
The applicant made a record of interview (” Record of Interview”) that Mr Harington signed. The applicant showed on the Record of Interview that Mr Harington’s investment experience was “Good”. Mr Harington disagreed with this assessment of his investment experience, describing it as “limited”. The applicant did not prepare a detailed budget of living expenses for Mr Harington.
Investment in Settlers Ravenswood
10. The applicant recommended that Mr Harington invest in a Settlers Ravenswood Note. As this was not found to be an inappropriate investment, it is not necessary to say more in relation to it.
Investment in Market Street Mezzanine Promissory Notes
11. Around March 2003 Mr Harington sought advice from the applicant on the investment of a further $50 000. By letter dated 11 March 2003 the applicant recommended to Mr Harington that the sum be placed in a Market Street Mezzanine Promissory Note. The advice was acted upon by Mr Harington.
Rollover of the Market Street Mezzanine Promissory Notes
12. By letter dated 12 November 2003 the applicant recommended that Mr Harington rollover the investment in the Market Street Mezzanine Promissory Notes. This advice was accepted and acted upon.
Loss of investment
13. As a result of Market Street Mezzanine Limited going into liquidation, Mr Harington lost the $50 000 invested.
The applicant’s giving of financial advice to Mr and Mrs Shadforth
The nature of the investor
14. On or about 31 October 2002 Mr & Mrs Shadforth sought investment advice from the applicant.
At that time:
(a) Mr Shadforth was 52 years old, married and a semi-retired welder;(b)He had no formal qualifications other than being a qualified welder having left high school at about the age of 14;
(c) He owned his home outright;
(d)His total net assets (including home) had a value of approximately $415,000 and total net assets (excluding home) had a value of approximately $315,000;
(e) His investment experience was limited;
(f) He ranked security higher than income in terms of investment objectives; and(g)He was looking for investments that were secure and paid around 7% return as this is what he had calculated as a return on his investment that would give he and his wife sufficient income to live on.
On or about 26 November 2002 the applicant asked Mr Shadforth a series of
questions to determine his risk profile.
Based on Mr Shadforth’s responses, the questionnaire rated him a “conservative”
investor.
Market Street Mezzanine Promissory Notes
15. By letter dated 27 November 2002 headed ‘Investment recommendation’ without preparation of a financial plan (“Investment Recommendation”) the applicant recommended that Mr & Mrs Shadforth:
(a)Transfer $155,676 from a Colonial Mutual Allocated Pension into an Asgard Investment Account and an Asgarrd Allocatted Pension account; and
(b)Transfer $150,000 from the Colonial Mutual Allocated Pension into a Market Street Mezzanine Promissory Note.
16. On 8 March 2006 the applicant completed and signed a document titled “Westpoint Investor Information Sheet” concerning Mr & Mrs Shadforth. The document shows that the recommendation resulted in 49% of Mr & Mrs Shadforth’s portfolio being invested in a Market Street Mezzanine Promissory Notes.
Rollover of Market Street Mezzanine Promissory Notes
17. By letter dated 12 November 2003 the applicant recommended to Mr and Mrs Shadforth that they rollover the investment in the Market Street Mezzanine Promissory Notes. This advice was accepted and then implemented.
Loss of investment
18. As a result of Market Street Mezzanine Limited going into liquidation, Mr and Mrs Shadforth lost the $150 000 invested.
Decision under Review
19. The decision under review was made by a delegate of the respondent.
20. The delegate concluded that the advice given by the applicant to Mr Harington to invest in a Market Street Mezzanine Promissory Note was not appropriate because the investment was not a secure one, carried a high level of risk and was not a prudent one having regard to the personal circumstances, investment objectives, financial situation and needs of Mr Harington.
21. He reached the same conclusion in relation to the rollover of that investment, with the added rider that the applicant had not ascertained whether Mr Harington’s personal circumstances, investment objectives, financial situation and needs had changed.
22. The delegate reached the same conclusions concerning the advice to Mr and Mrs Shadforth.
23. He therefore concluded that with respect to the investments in the Market Street Mezzanine Promissory Notes, the applicant had not given appropriate advice as there was no basis for him to recommend to each an investment in a high risk investment.
24. He also concluded that there was reason to believe that the applicant would not comply with s 945A of the Act given the non-compliances, that they concerned a legal obligation and involved a failure to acknowledge them and to justify his conduct.
25. The delegate therefore made the banning order for a period of three years. He did so in reliance upon para 920A(1)(f) of the Act, declining to rely upon para 920A(1)(e).
Evidence
26. Evidence for the applicant was given by him, by his expert witness M/s Julie Matheson CFP, and by Messrs Martinovich and McNally of Brighton Hall. The respondent did not call any witnesses. In particular, no evidence was called from Professor McMaster upon whose report the delegate had relied for the view that the Westpoint Product was high risk, with the result that the Professor’s report was not relied upon in submissions.
Change of Law
27. It is common ground that the Tribunal should proceed on the basis that the obligations imposed by ss 945A(1) on the giving of the two Rollover advices in November 2003 were, for all practical purposes, the same obligations as had to be performed by the applicant when giving the first advices to each investor. As the respondent puts it, what was required was that the advices given to the clients were required to be both ‘reasonable and appropriate.’ If they were not so, then the applicant had breached a financial services law with in the meaning of paras 920A(1)(e) and (f).
Applicant’s Case
28. The applicant contends that based on what he then knew, the advices he gave were appropriate at the time, in the circumstances known to him. The applicant accepts that the Westpoint group collapsed in 2005. However, he argues that at the time of the advices in 2002-2003, it reputation as a property developer was excellent.
29. The applicant asserts that at the time of the first investments, the licensee, Brighton Hall, was satisfied with the Westpoint financial situation so that there was no reason why advisers could not recommend the Notes as an investment. Inquiries of Westpoint had been made for the licensee by Messrs Martinovich and McNally. Further inquiries were made by the licensee concerning the Westpoint Guarantee. There was no evidence of the licensee advising the applicant of any concerns about Westpoint generally or concerning its prospectus. Brighton Hall had obtained a copy of an independent report into Westpoint by the independent accounting firm, Stanton Partners dated 25 February 2003 which evaluated risk of investment as low.
30. In addition to not receiving any negative advice concerning Westpoint from the licensee, the applicant read and used the required Brighton Hall template statements of advice as the basis of his advice on risk. He used the template record of interview forms when interviewing the clients. He determined that both clients, whilst conservative or moderate class of investors, had specific income requirements to fulfil their lifestyle needs. He formed the view that the income requirements could be met by including investments in the Notes. In the case of Mr Harington, he had previously invested in a similar product, the Settlers Ravenswood Debentures. He was motivated by his desire to achieve the income requirements of the clients. Nevertheless he had used the template to explain to the clients the risk factors involved. In his view the Westpoint Notes carried risk above low but not high. He had not put a worst case scenario to the clients as the template advice had not provided for it.
31. The applicant knew that Westpoint was on and remained on its Approved Product List. He read various reports such as two Information Memoranda, a PIR report, investor updates and the Market Street Mezzanine Prospectus issued in November 2002. The applicant relies on the evidence of his expert Ms Matheson to the effect that it is reasonable for an authorised representative to rely on due diligence conducted by the licensee and that it would be inappropriate for a reasonable representative to provide advice based on the representative’s research.
32. In relation to the Prospectus, the applicant had awaited its issue or impending issue, because he considered the absence of any stop order placed on it by ASIC enabled him to rely upon it on the basis that ASIC had reviewed it. He had read the Prospectus in the context of the advice he had received from the licensee that it was satisfied concerning the Westpoint Guarantee and that the Westpoint financials were accurate and reliable.
33. In relation to the Rollover advices, the applicant had been aware of the clients’ personal circumstances through direct or indirect knowledge. He had intermittent contact with the clients in the period between the first and second investor advices. There had not been any changes to his knowledge in the clients’ circumstances. Further, the Rollovers were each done within 12 months of clients initial interviews. The applicant’s expert M/s Matheson gave evidence that it was reasonable for a representative to assume a client would inform him or her of any relevant change to personal circumstances. In the case of Mr Harington, her opinion was that it was reasonable for the applicant to assume he would have informed him of any relevant changes during their discussions on 30 July 2003.
34. In addition, the applicant had sent to EAS the draft renewal advice in relation to which no issues were raised concerning advice on risk.
35. Again the applicant contends that there was a reasonable basis for his advice: he had made reasonable inquiries into the personal circumstances of the clients; the advice was appropriate to the clients, especially given their objective as to income requirements. Further, he had not placed all then clients’ investment funds in the Notes.
36. In submissions for the applicant it was accepted that he was significantly influenced by the licensee. He had not conducted his own forensic review of the documents upon which the licensee had relied. His reliance in this respect was influenced by his comparative inexperience as an advisor.
37. It is contended for the applicant that the investment which he recommended and made for the clients, would have satisfied both clients’ need for income. The interest would have provided a steady stream of income to both clients.
38. Further, the applicant had taken sufficient amount of information in relation to the profile of each client and each of their needs to satisfy the requirements of s 945 of the Act. He obtained sufficient details of the financial circumstances of each client, identified the financial needs of each client, identified the risk tolerance of each client and then matched a product to those circumstances and risk tolerance.
39. Additionally it is contended for the applicant that it would be unreasonable in the circumstances to expect an authorised representative in the applicant’s circumstances as they were at the time of the giving of the four pieces of advice to go beyond the review of the licensee or to perform the functions of a lawyer to critically examine each and every document to find out what weaknesses, if any, were apparent. Reliance is placed on the evidence of M/s Matheson that at the time the Notes were issued, the training provided by the licensee would be no more than to digest the information provided by the licensee and it would not be expected for an authorised representative to seek out additional information or carry out additional research on the Notes.
40. The concluding submission for the applicant is that the evidence as a whole reveals that he acted reasonably, exercised reasonable care in his consideration of the investment, formed a view on a reasonable basis that the product was low risk or at least not high risk, considered the described income needs of the clients together with their risk tolerance and provided a product for each investor that he considered met their investment objectives.
Respondent’s Case
41. The respondent submits that the first two advices were neither reasonable nor appropriate for four reasons:
·the applicant did not have enough information about the product to make a positive recommendation;
·the information which he had was not sufficiently current;
·the product was a high or higher risk which was not suitable for the clients;
·the applicant failed to disclose material matters to the clients about his positive advices.
42. In addition, in relation to the Rollover advices, these were not reasonable or appropriate in that the applicant did not separately consider the appropriateness of the rollover at the time and, in particular did not appraise the product or the relevant property market in Melbourne at the time he gave the two Rollover advices.
Absence of enough information
43. The respondent submits there were five material areas in respect of which the applicant did not have enough information. The first was how the interest was to be paid. The evidence establishes this was not known to the applicant and, in particular, was not disclosed by the Prospectus.
44. The other areas were the financial position of relevant entities, including relevant cash flows; the strength of the Westpoint Group; the value of the Westpoint Guarantee; and the worst case scenario for the clients.
45. It was accepted by the applicant and his expert M/s Matheson that the Prospectus provided the best source of information. That document made it clear that Westpoint Management Ltd was effectively the entity paying the interest to the applicant’s clients. However, it did not provide a balance sheet, profit and loss or cash flow information for that company.
46. The applicant accepted he had relied upon the financial strength of the Westpoint Group to give him some comfort on payment of interest and reduction of interest. However, he knew he had no audited figures for that Group. The Prospectus made apparent there were no cash flows for it and no disclosure of any of its contingent liabilities. Further, the applicant’s expert considered it would not be reasonable for the applicant to have relied on the financial strength of the Westpoint Group in giving the advices. Additionally, she did not consider the Westpoint Guarantee should have been relied upon. The applicant accepted that he had not been given financial information about the guaranteeing group and so could not make an assessment of the value of the Guarantee.
47. The respondent also contends that the applicant should have given consideration to the worst case scenario.
Insufficient currency of information
48. The respondent contends that information which was available to the applicant was not sufficiently current to allow the applicant to provide reasonable and appropriate advice.
Level of risk
49. As an exception to its acceptance of the manner in which the applicant gave his evidence, the respondent challenges the effect of the applicant’s evidence on the level of risk. Initially in cross-examination the applicant accepted that he was not saying the product was low risk and he accepted it had a higher risk. Further, he there accepted that the product had a higher return which indicated there was a higher risk with the product. Later in cross-examination the applicant said the product was a low risk or low or medium or little higher than low risk.
50. Additionally the applicant suggested that Brighton Hall had advised him the product was a low or lower risk product and was suitable for a cautious investor. This was not contained in the applicant’s written or oral evidence in chief. Neither of Mr Marinovich nor Mr McNally gave any evidence to support that evidence of the applicant.
51. The respondent contends that it is clear the product was always a high or higher risk product. Further that the applicant understood that at the time or should have done so.
52. The applicant did not give any evidence to explain how the return on the product was higher but the product was low risk. All of the applicant’s witnesses accepted that there was a relationship between the return and the risk. Although M/s Matheson gave the opinion that the product was low risk, that was based on the presence of audited financial statements for the Westpoint Group.
53. Therefore the respondent submits the applicant’s evidence that the product was low risk was not satisfactory and should not be accepted.
Material non-disclosures
54. The respondent submits that the applicant should have advised the clients of material non-disclosures. It said these were identifying the worst case scenario; how the interest was to be paid; the absence of real information concerning the financial position of the Guarantee Group; and the absence of enough information to properly assess the product or the risks inherent in it. The applicant accepted that his had made no such disclosures to the investors.
Rollover advices
55. In the case of the Rollover advices, the respondent relies on the above factors. It also contends that those advices were not reasonable and appropriate because the applicant took a view about the product when he gave his first advices; he did not revisit his advices or his view of the product; and he made no further enquiries about the market situation and did not know what was happening in the Melbourne apartment market in November 2003. Reliance is placed on what is said to be the absence of separate consideration of the appropriateness of the Rollover advices, thus rendering them neither reasonable nor appropriate. M/s Matheson accepted the need for the Rollover advices to have separate review. The applicant had not revisited the advices and relied on the clients to tell him whether anything had changed. The respondent contends the reasonableness of this is to be seen in the context of the fees/commissions which the applicant enjoyed from giving the advices and having them accepted.
Was the advice reasonable and appropriate?
56. I am not satisfied that having regard to the information which the applicant obtained from the clients in relation to their personal circumstances, he gave such consideration to, and conducted such investigation of, the subject matter of the advice as was reasonable in all of the circumstances. In the result the advice given was not appropriate to the clients because the consideration and investigation was not adequate.
57. In my view, that was clearly the case in relation to each of the Rollovers advices. Additionally they failed to be based on adequate reasonable inquiries in relation to personal circumstances.
58. I am satisfied that the applicant did not have enough information in relation to the first four issues raised by the respondent. I leave aside the worst case scenario because it was not one of the issues required to be considered by the template to which the applicant gave consideration.
59. I am satisfied that the applicant did not hold a clear consistent view on the level of risk in the product.
60. I am satisfied that the applicant did not make the material disclosures on the last four of the issues raised by the respondent, again leaving the worst case scenario to one side.
61. I am further satisfied that if the applicant had adverted to these issues he would have given deeper consideration to them and conducted an appropriate investigation of them, so far as he was able consistently with his office as an authorised representative.
62. Unfortunately the applicant was new to his task of being an authorised representative. He focussed more on sorting out what had been given to him rather than applying his mind to which issues required clarification and endeavouring to find information concerning them to the extent appropriate to the office which he held.
63. I am therefore satisfied that all four of the advices were not reasonable and appropriate.
64. I am therefore satisfied that the giving of the four pieces of advice by the applicant to the clients, being advice not reasonable and appropriate, has the consequence that the applicant has not complied with a financial services law: S 920A(1)(e).
65. I am not satisfied that it has been established that ASIC has reason to believe that the applicant will not comply with a financial services law. To the contrary, there is evidence that the applicant ceased to be a financial services provider and has practised his profession of accounting.
Identification of appropriate penalty
66. The penalties which may be applied in the present circumstances are a banning order or an enforceable undertaking.
67. I return to the factors listed in regulatory guide 98. There is no question that the clients have suffered a significant loss. I do not find that the evidence supports the view that the applicant engaged in a deliberate course of conduct to enrich himself at the expense of the clients but with a lesser degree of dishonesty than applicable to a case of permanent banning. I find that the applicant’s conduct involved some incompetence and irresponsibility but with the definite possibility that the applicant may develop requisite skills and abilities. I do not find that there were continued, knowing and wilful contraventions of the law and disregard of legal obligations as I do not consider the applicant was aware of where his conduct fell short of the requirements of the law.
68. Turning to the factors in the regulatory guide 98 applicable to banning for under 3 years, I find there was some loss to the clients as a result of carelessness or inadvertence rather than dishonesty by the applicant. I further find that the applicant has attempted to remedy the contravention and has fully cooperated with the respondent, his attempt at remedy being his immediate cessation of practice as an authorised representative. The applicant does not have any previous history of contraventions. The applicant has engaged in demonstrated behaviour of clear intention to comply with legal obligations by his withdrawal from activity in relation to Australian financial services law.
69. I therefore consider that the applicant is properly to be placed near the top of the factors requiring banning for under 3 years but not in the factors requiring banning for 3-10 years.
Conclusion
70. In my view it follows it is appropriate to impose a banning order on the applicant. I consider the duration of the order should be for two years. The decision under review should therefore be varied to allow for banning for that period. The decision should otherwise be affirmed.
I certify that the 70 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon Robert Nicholson, Deputy President
Signed: ........(sgd) T Freeman................................................
AssociateDate/s of Hearing 10 and 11 March 2009, 29 and 30 April 2009l
Date of Decision 19 June 2009
Counsel for the Applicant Mr G Rutherford
Solicitor for the Applicant Cornerstone Legal
Counsel for the Respondent Mr M HowardSolicitor for the Respondent Australian Securities and Investments Commission
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