Love and Australian Securities and Investments Commission

[2024] AATA 1095

Love and Australian Securities and Investments Commission [2024] AATA 1095 (7 May 2024)

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2023/3164

Re:Brian Joseph LOVE

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal:Deputy President B W Rayment OAM KC

Date:07 May 2024

Place:Sydney

IT IS ORDERED that the decision under review is set aside and substituted with a decision that the applicant, from the date of this order, is exempt from so much of Part 7.6 of the Corporations Act 2001 (Cth) as required for the applicant to pass, before the end of the calendar year 2021, the examination, to the intent that the applicant may now resume practice as a financial planner able to give personal financial advice.

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Deputy President B W Rayment OAM KC

CATCHWORDS

FINANCIAL – where applicant ceases to be a relevant provider of financial services – where applicant failed to complete exam requirement under new rules – whether Tribunal should exercise power to exempt applicant from statutory requirement – where special circumstances found – COVID19 affected business – decision under review set aside and substituted

LEGISLATION

Corporations Act 2001 (Cth)

CASES

Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 24 ALR 307

REASONS FOR DECISION

Deputy President B W Rayment OAM KC

07 May 2024

Reasons for decision

1. The applicant has been a certified financial planner since 1996. He practices as an accountant in the Illawarra area and has never been the subject of any adverse action by ASIC or complaint from a client.

2. In circumstances that were unexpected and very unusual, he lost his right to remain a certified financial planner on 1 January 2022 and sought from ASIC an exemption under s.926A of the Corporations Act, 2001 from the consequences of those circumstances. It is accepted by ASIC that, although, in certain circumstances, it had discretionary power to grant the applicant an exemption, it declined to exercise its discretion. The applicant now seeks review of this decision in the Tribunal. The Tribunal is armed with the same discretion as ASIC and the question in this review is how it should be exercised. The touchstone of the exercise, or re-exercise, by the Tribunal of a general discretion has always been that first enunciated by Smithers J in Collector of Customs (NSW) v Brian Lawlor Automotive Pty Ltd (1979) 24 ALR 307, 355; that is, good government.

3. Existing financial planners were required by legislation in force at the relevant time to have certain educational requirements. The applicant had a degree of Bachelor of Commerce and Accountancy, and later an MBA.  He is a CPA and passed that organisation’s course to  become a financial planning specialist.

4. By the combination of statutory amendments and the effect of regulations, in order for the applicant to have retained his status as a certified financial planner on 1 January 2022, he either had to sit for one  exam in the calendar year 2021 and pass it, or he had to sit for two exams in the calendar year 2021 and if he was unsuccessful in both exams he would have had until 1 October 2022 to sit for a further exam. In fact, he was able for several reasons to sit for one exam in 2021, and apparently, like 48% of candidates who sat for the exam he attended, he was not successful. Then in May 2022 he sat for the 2022  exam and passed it.  So, if he had passed a second exam in 2021, with the same result he obtained in May 2022, or if he had sat for two exams in 2021, and even if he failed both, he would have been entitled to sit again prior to October 2022.

5. Why did the applicant fail to sit twice in 2021?

6. The applicant’s answer is set out in his Statemen of Facts Issues and Contentions (SFIC) dated 31 July 2023 at paragraphs [9] – [19] as follows:

   9. The Applicant planned to attend the 10 September 2021 exam in person in Wollongong, but the Illawarra area including Wollongong was undergoing lock-down to the point it was not practicable to attend an exam centre under State laws. It would also have been imprudent to do so given the risk of catching COVID and becoming ill, severely ill or worse.

   10. Candidates that did not physically attend were permitted to undertake the exam by way of computer subject to use of specified proctoring program, whereby they were to use their own computers with a camera after downloading the proctoring software.

   11. Candidates were emailed a “Proctoring/Exam Information” pack that included a Manual-Step-by-Step Guide detailing the IT software specifications. At page 11, towards the top of the page, the Guide clearly stated that Windows 7 (W7) operating software (the operating system used by Mr Love’s laptop computer, the only one in his office with a camera) or greater was sufficient to download the proctoring software. This proved not to be the case.

   12 There were other computers in the Applicant’s office, and the Applicant did consider attaching a camera to them. The Applicant did attempt to download the proctoring software consisting of over 300 mb on one of them, but following this the computer ceased to function despite the efforts of an IT consultant Mitchell Lanesbury to fix it.

   13 After repeatedly being unsuccessful when trying to download the proctoring software, the Applicant made enquiries to the proctoring company ProctorU, in Alabama, USA at 8:00pm Sydney time on Friday 3 September 2021. The Applicant was informed that the required operating software required was in fact Windows 8 or above, not W7 as had been previously advised in the Guide supplied by FASEA.

   14 At 9:26am on Monday, 6 September 2021, the Applicant instructed a member of his staff, Ms Oliver, to make contact with local IT service consultant Tony Bujaroski to see if the Applicant’s business’ hardware and software could be upgraded. It became apparent that an upgrade to the Firm’s hardware and software was not straightforward and would take some time over many days. It was at this point, (2:21pm) that the Applicant instructed Ms Oliver to contact the FA Exam team to possibly defer the exam but also for them to ring our office to discuss his options – this, they never did but rather they unilaterally deferred the Applicant’s exam date from September to November 2021.

   15 The FA Exam Team at ACER ([email protected]), moved the Applicant’s exam to Thursday 11 November at 2:00pm at the Sydney venue of their own accord.

   16 The Applicant did expect that there may be scope to have the FASEA exam enrolment rescheduled back to enable him to attend the September sitting, if he became enabled to use the proctoring software on a computer that he could access with his work email that he had given in the enrolment and if he could give sufficient notice to FASEA. He therefore pursued trying to enable this to occur.

   17 After the installation was completed by Tony Bujaroski, multiple equipment checks run from the Applicant’s ProctorU account, as his newly purchased computer and upgraded Windows software was being installed the evening before the September 10 exam. Due to security arrangements and the size of the downloads that had been installed as part of the system, the ProctorU software download was not successful and Mr Love was then unable to complete the exam on that day.

   18 The Applicant had no obligation to sit for the September 2021 exam but the Applicant had an incentive to sit the exam. The Applicant had no reason not to complete the exam if it was practicable for him to do so because his mere attendance, even through the proctoring software, at the exam would have meant that the Applicant had clearly ‘sat’ for the exam and so was able to achieve an extension to pass the exam until 30 September 2022 should he not pass that exam or the later exam in November 2021 and remain a relevant provider during that period.. The Applicant was aware of the extension for passing the exam, it having been announced by the then Minister on 24 June 2021, as part of a set of reforms, that she considered the reforms “will further streamline the number of bodies involved in the oversight of financial advisers, delivering improvements to the regulatory framework for the sector and enhanced access to affordable and quality financial advice for Australians.”

   19 The Applicant sat the exam at the remaining opportunity in 2021, in November 2021, but was like 48% of candidates was unsuccessful in passing the exam. He subsequently enrolled to sit the exam again on 13 May 2022 and passed the exam on that attempt.

7. In oral evidence the applicant said that he was distracted during the November exam by a lot of noise in the exam room.

8. On these matters the respondent says in its SFIC dated 4 September 2023 at paragraphs [43] – [46] that:

   43 The exam began to be offered in June 2019. As of February 2021, the exam had been offered 10 times. The results for an exam were available between six to eight weeks after sitting the exam.

   44 In 2021, the exam was offered 5 times: January, March, May, September, and November. An online exam option with remote proctoring was offered for all exam sittings in 2021. The exam results for the September exam were released on 25 October 2021. Candidates had to be registered for the November exam by 29 October 2021.

   45 There was a Corporations (Relevant Providers Exam Standard) Determination 2019. That Standard was amended in 2021 to provide relief from the requirement that a person must not have sat an exam within 3 months of being registered. That allowed candidates who had been unsuccessful at any prior sitting to sit the November exam.

   46 ASIC released Information Sheet 260 which set out information about the timeline for passing the financial adviser exam. The Information Sheet was originally published on 22 September 2021. That Information Sheet outlines, amongst other things, that an existing provider who had not passed the exam by 31 December 2021 and was not a relevant provider on that date would only need to pass the exam (i.e. would not need to complete the Professional Year Requirement as well).

9. In other words, the respondent says that the failure of the applicant to sit for at least two exams in 2021 was because he started too late.  The applicant answered that suggestion by saying that he was very busy because of the effect of Covid restrictions on many of his clients. He says in paragraph 18 of his SFIC in reply dated 18 September 2023:

   18 The choice to sit the later exam sessions was also reasonable because from February 2020 onward due to the financial, economic and social impact of Covid-19 pandemic, the Applicant’s small business went “pens-down” on any unnecessary non-client work to assist its clients with applications for Federal and State Government financial support. The Applicant prioritised addressing his clients’ distress in unprecedented times over personal exam study or attendance in the absence of any legal obligation for him to enrol for earlier exam sessions.

10. The applicant verified the statements in his SFIC in his oral evidence. I was impressed with the applicant’s evidence and I accept it.

11. In one respect only do I reject the evidence given by the applicant.  He said that he thought he sat for two exams in 2021 because of his attempt to sit for the second exam. An attempt to sit for the second exam cannot amount to ‘sitting’ for it in my opinion. However, for the present application, the fact that he sat for the May 2022 exam, wrongly thinking he was entitled to do so, is in fact useful for him in  the present case.

12. Covid and some computer difficulties made him unable to sit for a second exam in 2021.

13. the applicant made, in my opinion, genuine and detailed attempts to sit for the exam in September 2021.

14. As sitting for and passing the May 2022 exam suggests, he was in fact a competent financial planner, and his experience of more than twenty-five years in the occupation or profession, with no adverse finding by ASIC, nor complaint from a client, also strongly suggests this to be the case.

15. It is also true that the exigencies of the Covid pandemic contributed, in part, to bringing about the situation of the applicant and his companies as a result of his not being permitted to give individual financial advice since 1 January 2022.

16. The effect on the applicant, his companies and his clients, of his failure to be able to give personal financial advice in 2022 and 2023, which has continued up to the date of these reasons, is that he and his companies have lost income. If he is required to undergo further steps — such as being supervised for one year by his own employee, or to sitting for another exam — he will suffer further and unnecessary delay in resuming giving personal advice to his various clients. There is no good reason to cause him that difficulty, in the special and unusual circumstances of his case in my opinion.  His degree qualifications exceed what is necessary and his experience is substantial.

17. Courts often say that special circumstances are not necessary before a general discretion to give relief in the case of general discretions. That is of course correct. However, it must often be the case that proving that special and unusual circumstances arise will predispose a decision-maker to exercise a general discretion.

18. I agree with ASIC that s.926A confers a general discretion. The section must be construed in the light of its text and context, including as a relevant consideration the objects clause.

19. The appropriate order, in the special circumstances of the case is to give the applicant, from the date of these orders, an exemption from so much of Part 7.6 of the Act as required for the applicant to pass, before the end of the calendar year 2021, the examination which he in fact passed in May 2022, to the intent that the applicant may now resume practice as a financial planner able to give personal financial advice. It is so ordered.

I certify that the preceding 19 (nineteen) paragraphs are a true copy of the reasons for the decision herein of Deputy President B W Rayment OAM KC

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Associate

Dated: 07 May 2024

Date(s) of hearing:	1 & 2 February 2024
Date final submissions received:	01 March 2024
Counsel for the Applicant:	Mr T Glover
Solicitors for the Applicant:	Mr G McCarthy, Mills Oakley
Counsel for the Respondent:	Dr P Bender
Solicitors for the Respondent:	Ms G Wong and Ms A Rees, ASIC