Tindall and Australian Securities and Investments Commission

[2018] AATA 3101

Tindall and Australian Securities and Investments Commission [2018] AATA 3101 (29 August 2018)

Division:TAXATION & COMMERCIAL DIVISION

File Number:           2017/0257

Re:Darren Tindall

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:29 August 2018

Place:Canberra

The decision under review is affirmed

..............................[sgd].......................................

Deputy President Bernard J McCabe

CATCHWORDS

CORPORATIONS – banning order from providing financial services for five years – contravention of financial services law – whether conduct misleading or deceptive – whether conduct dishonest – whether length of banning order is appropriate – decision under review affirmed

LEGISLATION

Australian Securities and Investments Commission Act 2001 (Cth) – ss 1, 1(2)(g), 1(2)(b)

Corporations Act 2001 (Cth) – ss 760A, 920A, 920A(1), 920A(1)(d), 920A(1)(da), 920A(1)(e), 920A(1)(f), 920B, 920B(2)(b), 1041E, 1041F(1)(a), 1041G(1), 1041H

CASES

Australian Securities and Investments Commission v Adler [2002] NSWSC 483

SECONDARY MATERIALS

Regulatory Guide 98 Licensing: Administrative action against financial services providers

REASONS FOR DECISION

Deputy President Bernard J McCabe

29 August 2018

INTRODUCTION

1. On 22 December 2016, a delegate of the Australian Securities and Investments Commission (ASIC) exercised the power in s 920A of the Corporations Act 2001 (Cth) (the Act) to ban Darren Tindall from providing financial services for a period of five years. Mr Tindall has asked the Tribunal to revisit that decision. His lawyer explained at the outset of the hearing that the applicant disputes some of the delegate’s factual findings but he concedes the case against him is such that a banning order must be made. I was told the applicant is now principally concerned about the length of the ban. He says less stringent action is appropriate.

2. During cross-examination, it became apparent the applicant disputes rather more of the evidence against him than his lawyer’s concession suggested. Mr Tindall is certainly sorry he has found himself in trouble with ASIC and has decided not to contest the essential allegations against him – but he does not appear to genuinely accept responsibility for what occurred, nor has he demonstrated much in the way of contrition.

3. I am satisfied the applicant should be banned for a period of five years. I explain my reasons below.

   ASIC’s concerns about the applicant’s conduct

4. ASIC’s delegate made her decision to ban the applicant after reviewing evidence in relation to four identified concerns that were said to enliven the power in s 920A(1) to take regulatory action. By the time of the hearing, I was asked to focus on three areas of concern. All three of the concerns arose between 9 May 2013 and 19 May 2014 when the applicant was working as an authorised representative of a financial services licensee, Roan Financial Group Pty Ltd. Mr Tindall was employed by that firm. He was not the principal. The concerns can be summarised as follows:

   (a)The applicant made false and misleading statements when he completed and submitted an application for insurance on a client’s behalf. The applicant said in an application for insurance form lodged with Unisuper that the client had no pre-existing medical conditions when he knew she did. While the applicant denied the conduct before the delegate, the delegate made her findings having regard to evidence from the client and computer logs suggesting, amongst other things, the insurance application was lodged using a computer in Mr Tindall’s firm.  Mr Tindall had been provided with the applicant’s password, and the delegate found that password was used to access the relevant website from the offices. The delegate concluded Mr Tindall’s conduct contravened s 1041H of the Act because it was misleading or deceptive conduct in relation to a financial product or financial service. Section 1041H is a financial services law for the purposes of s 920A(1)(e).

   (b)The applicant engaged in dishonest conduct. The delegate was satisfied that Mr Tindall – having obtained the insurance through Unisuper without disclosing pre-existing health conditions – then arranged for a roll-over of that insurance with another insurer, Asgard. That insurance was available without having to respond to fresh inquiries about the person’s medical condition although the application form expressly stated the person making the application was still required to disclose anything that was relevant to the insurer’s decision to offer the insurance. Mr Tindall arranged for his client to sign the document without making any disclosure of the matters of which Mr Tindall was aware. Mr Tindall collected a fee for his role after he submitted the application through the portal. That conduct contravened s 1041G(1) of the Act in that Mr Tindall had, ‘in the course of carrying on a financial services business in this jurisdiction, engage[d] in dishonest conduct in relation to a financial product or financial service.’ Contravention of s 1041G is a failure to comply with a financial services law.

   (c)The applicant was reckless in statements provided to clients. The applicant provided statements of advice to four clients that recommended superannuation products which would leave the applicants worse off. (One of the four clients was the same person who was involved in the other two matters of concern.) The statements of advice included tables that made comparisons between different strategies but the comparisons were inaccurate. Those statements were said to contravene s 1041F(1)(a) which prohibits inducing another person to deal in financial products by making a statement or publishing a forecast if the maker of the statement knows or is reckless as to whether the statement is misleading, false or deceptive. The applicant acknowledged before the delegate and in these proceedings that the statements of advice he prepared were misleading. Contravention of s 1041F is a failure to comply with a financial services law.

5. A failure to comply with the financial services’ laws is one of the grounds mentioned in s 920A (specifically, s 920A(1)(e)) that enliven the power to make a banning order. The delegate relied on that ground to make the order. She did not feel it necessary to make a finding on some of the other grounds that might suggest themselves, including:

   ·The person is likely to contravene a financial services law (s 920A(1)(f))  – presumably on the basis that the applicant’s demonstrated conduct and competence suggests further breaches are in prospect if he or she is allowed to continue in business;

   ·ASIC has reason to believe the person is not adequately trained, or is not competent, to provide financial services (s 920A(1)(da)).

6. ASIC submitted that it was open to me to rely on those grounds in these proceedings if I saw fit to do so, although I was told it was unnecessary since the power to ban was plainly enlivened in light of the findings I was urged to make in relation to s 920A(1)(e).

   My observations and findings in relation to the applicant’s conduct

7. I have already mentioned Mr Tindall made concessions through his lawyer about his conduct at the outset of the hearing. The applicant’s counsel, Mr Suthers, expressly agreed:

   ·there was enough evidence in relation to the first concern I have identified to be satisfied the applicant contravened s 1041H; and

   ·there was enough evidence in relation to the second concern identified to be satisfied the applicant contravened s 1041G.

8. Mr Suthers said there was not enough evidence in relation to the third concern identified for me to be satisfied there was a contravention of s 1041F – but conceded there was enough evidence to be satisfied the conduct amounted to a contravention of s 1041E. Section 1041E is also a financial services law. Relevantly, it prohibits making statements that include a false or misleading particular where the statement is likely to induce a person to apply for a financial product if the maker of the statement either did not care whether the statement was true or false or the maker of the statement knows, or ought reasonably to have known, the statement of information was false or misleading in a material way.

9. If I accept those concessions, it is clear the power in s 920A to ban is enlivened because I could be satisfied the applicant has not complied with a financial services law (s 920A(1)(e)). There may also be reasons for believing Mr Tindall was likely to contravene a financial services law, which provides an additional basis for the exercise of the power under s 920A(1)(f). It should be said the applicant’s concession does not go that far.

10. Having heard those concessions being made on his behalf, the applicant gave evidence at the hearing. That evidence was unsatisfactory in some respects. Mr Tindall made clear he did not accept he was responsible for important aspects of the conduct alleged against him, and he said he did not do some of the things which form the basis of concerns one and two. He said he was only agreeing to the concessions because he did not have the resources to fight on and dispute what was alleged against him. In cross-examination, he said (transcript at p 21):

    …we can’t afford the fight any longer. The costs involved with doing this has pretty much wrecked us. So, I want to move forward with this, and yes. I have to accept something that I didn’t do.

11. Specifically, in relation to the first concern, he denied he accessed the client’s self-service account with Unisuper to file the application: transcript at p 15. While acknowledging in cross-examination that the computer logs provided by Unisuper indicated the computer which accessed the account was located in the offices of Roan Financial Group, he refused to accept he was the person who used the computer. He pointed out there were eight other people working in Roan’s offices at the time: transcript at p 21. He did not present any evidence that might explain how or why one of those other individuals might have accessed the client’s account using the password he was given. I can be sure he had that password because it appears in an SMS exchange with the client that is reproduced as an exhibit to the client’s statement: exhibit 7 at [13] and tab 5. It appears Mr Tindall had registered for self-service access to the client’s account. The service provider sent the password to the client which the client then passed onto the applicant. She did not recall ever accessing the service herself (exhibit 7 at [12]) and tab 4 of her statement shows the email from Unisuper confirming registration which appears to be addressed to an email account maintained by Roan Financial Group. Interestingly, while he sought to cast suspicion on others in the office, Mr Tindall acknowledged at least two of those people were away from the office on vacation at the time. He also agreed he had not previously blamed others in his office for making the application and provided no evidence to support the claim: transcript at p 21.

12. Mr Tindall also insisted it was the client who completed the relevant portion of the application form referred to in the second concern which failed to disclose her health conditions. I note the boxes in the portion of the form (exhibit 1 at T58 [see also exhibit 7 at tab 11]) that related to pre-existing conditions were checked with ticks while the boxes on the rest of the form were completed with crosses. That is interesting given Mr Tindall said “I am a crosser, that’s what I do. I don’t really do ticks.” (Transcript at p 17). But Mr Tindall also acknowledged he was aware of those pre-existing conditions when the application was being made. He agreed he signed the form. His explanation was that it was the client’s responsibility to provide the personal detail. He said he drew the requirement to the client’s attention and that any non-disclosure was down to her: transcript at p 16. When asked whether he understood the duty of disclosure that arises in relation to insurance contracts, he was initially evasive. He claimed he was following the practice required in his firm. He also pointed out the relevant matters had been disclosed to another insurer and there was an indication the disclosure was not an obstacle to obtaining insurance from that firm: transcript at p 17. His evidence on this point was perplexing. It is unclear how disclosure to one insurer is supposed to excuse non-disclosure to another. In any event, Ms Graycar, for ASIC, pressed the applicant on his understanding of the duty of disclosure. The following exchange occurred in cross-examination (transcript p 17):

    Ms Graycar: So, are you saying that at the time as a licensed financial adviser, you were unaware of the fact that you had a duty to disclose all relevant things under the Insurance Contracts Act?

    Mr Tindall: I’d say yes, if you want me to be honest. I’ll say yes.

13. It was a startling admission that reflected poorly on the applicant’s competence and diligence – assuming in his favour that I accepted the client was the one who completed the form inaccurately. I am not persuaded I should make that assumption. In the course of responding to questions I asked at the end of the cross-examination, Mr Tindall sought to heap all the blame onto the client and effectively said he was being set up to take the fall on her behalf. At pp 21-22 of the transcript, he is recorded as saying the client:

    …put in evidence that she felt that she had done something so wrong, she was going to go to prison, and my counsel will probably hate me but we have been through seven different iterations of her statement, up until the one we’ve got today, would be eight. She has – yes, I can’t. It you are to believe this, you know, and we’ve put forward the same piece day in and day out, a lady who wanted insurance got insurance but when found that she did it the wrong way, blamed me. That’s the reality for me.

14. The client told a more nuanced story in her principal statement (exhibit 7). The client made clear that she and Mr Tindall discussed her conditions in the online form which gave rise to the first concern. She said Mr Tindall decided how the relevant question should be answered, and that she effectively acquiesced in an answer that Mr Tindall had proposed: at [20]. She admitted Mr Tindall had said he had a “great idea” which involved not disclosing she was sick in the Unisuper application and then switching the cover over to Asgard in a second application which would not ask any questions: exhibit 7 at [16]. She claimed she rationalised what was being done and suggested she thought Mr Tindall was doing her a favour but added – oddly – she also trusted him as a professional: at [33]. (Why one would trust a professional who had just lied on one’s behalf is a mystery. By definition, that person is not acting as a professional.) She said she did not see the whole of the application form that was the subject of the second concern. She claimed it was pre-filled and she signed when asked to do so: at [29]. She laid the blame for that application form at Mr Tindall’s door.

15. While the client’s statement effectively acknowledges she was aware of what was going on in relation to the Unisuper application (the subject of the first concern) and was worried that what was said in the form “might come and bite me in the arse” (at [37]), she did not take any responsibility for what was said in relation to the second application. That is surprising given she admitted she was aware of the larger plan to approach Unisuper and then switch over to Asgard: exhibit 7 at [16]. I am not sure it matters.

16. What is clear from the evidence is Mr Tindall submitted two application forms containing false information about the client’s pre-existing health conditions. In each case, Mr Tindall either knew or should have known he was subject to a duty of disclosure, and he was aware material facts about the applicant’s health were not disclosed. (He certainly did not deny he was aware of the non-disclosure in the second form, even if it was the applicant who filled out the contentious portion of that form.) It makes no difference if the client also failed in her duty of disclosure. Mr Tindall was the one submitting the forms. And there can be no doubt Mr Tindall submitted the first form, contrary to the answer he gave in cross-examination. He had the password to the self-service account which was provided by the client. The client’s statement makes clear (exhibit 7 at [12]) the self-service account was set up by Mr Tindall to facilitate the applications. She also said she watched over his shoulder as he submitted the form: exhibit 7 at [17].

17. There might be serious questions over the credit of the client, but two things must be said on that point. First, the applicant did not seek to cross-examine the client at the hearing. Her evidence was tendered without objection. Second, even if the client did not come to the proceedings with clean hands, the evidence as a whole still clearly implicates the applicant in the material non-disclosure. It does not matter whether he was the author of the scheme or merely a conspirator. I am satisfied the evidence clearly establishes he engaged in the conduct referred to in the first concern which contravenes s 1041H. I am also satisfied the applicant engaged in the conduct as described in relation to the second concern which amounts to a contravention of s 1041G.

18. That leaves the third concern. Mr Tindall did not dispute that he provided statements of advice to four clients that included inaccurate comparisons between the existing superannuation products held by those clients and alternative arrangements. The statements were misleading because the applicant failed to properly account for the superannuation guarantee payments in some of the options. The statements in question can be found in exhibit 1 at T21 (pp  540-545), T73 (pp 940-942), T87 (pp 1155-1156) and T93 (pp 1355-1356 ).

19. Mr Tindall accepted that clients relied on the advice contained in the statements – although he quibbled in cross-examination over whether the clients relied on the specific comparisons rather than looking at the advice as a whole: transcript at p 20. The applicant also explained he had prepared the advice in the way he had been taught to prepare it, and that he submitted his draft statements of advice to Mr Roan, the firm’s principal, before sending them to the client. He said he assumed Mr Roan would have told him if there was a problem in what he was doing. He also blamed the software package the firm used which complicated the business of making comparisons: transcript at p 14.

20. I think Mr Suthers was right to concede, on the applicant’s behalf, that the conduct as described amounted to a contravention of s 1041E, if not s 1041F. The statements were apparently intended to induce the clients to change the products they were using, and the clients – or some of them – acted accordingly. While a finding of recklessness (a feature of the charge in s 1041F) is presumably more serious than a finding that the applicant made a statement he knew or reasonably should have known was false (the focus, for present purposes, of s 1041E), the end result is still a contravention of the financial services laws. Once that contravention is established, it becomes more important to focus on the applicant’s overall behaviour. That behaviour and his explanations for it go to the stringency of the regulatory action.

21. Mr Tindall’s evidence in relation to the third concern appeared to follow the same pattern as his evidence in relation to the other concerns I have discussed. Notwithstanding the concessions made on his behalf, he did not accept he had done the wrong thing, and if he had, it was somebody else’s fault, or was the product of inexperience, or was the fault of the technology. Indeed, Mr Tindall appeared to regard himself as something of a victim in this whole process. He pointed out he had already been involved in expensive proceedings involving the Financial Planning Association (FPA) which resulted in swingeing penalties. (The applicant was required to pay a penalty of $16,000 following the FPA proceedings. That is a relatively modest amount: transcript at p 11.) He spoke of the “devastating” impact of the banning order on his wife, family and business: transcript at pp 12-13. He said the experience was “hell” for those around him: transcript at p 21. That damage came on top of the damage that occurred when the FPA penalty was reported in the financial advice press.

1. The applicant was asked during his evidence-in-chief to explain why he would be a fit and proper person after three years, if that were the period of the ban.  The answer (transcript at p 14) is revealing – perhaps more revealing than the applicant intended:

   I believe that everything that I’ve done, you know, to educate myself, to, you know, better people’s lives, I’m better if I’m in the financial planning game, or in the actual role versus what – now I feel very much that I’m not helping people and, yes, it’s an incredibly bad way to feel, but I don’t believe that I did what I’ve been accused of, but obviously there’s evidence and to state this, I can’t – we can’t afford to fight this any longer, so unfortunately our monetary reserves have run out, but if I came back quicker than the five years, I would prove how good I can be for this industry and to the people that need help….

2. The applicant’s answer to that question illustrates an absence of insight into his behaviour. Taken with the rest of the evidence in which he sought to shift the blame for what occurred, it is difficult to see what lesson he has drawn from everything that occurred. The facts are that he made false statements in applications for insurance lodged on his client’s behalf. He either ignored his duty of disclosure or – startlingly – was not aware that he had such a duty. He prepared advice that included misleading information for clients and sought to blame his supervisors for providing inadequate training, failing to monitor and provide feedback in relation to his work, and for making inadequate software available. His performance in the witness box was generally self-pitying and evasive when it came to accepting responsibility for what occurred.

   Is a banning order appropriate?

3. The applicant conceded at the start of the hearing that a banning order would be appropriate in the circumstances – although he proceeded to dispute what those circumstances were in the course of his evidence. In any event, he thought a shorter ban of approximately three years was appropriate rather than the five year ban that was imposed by the delegate. (The ban has already commenced; the applicant was unsuccessful in his application for a stay of the banning decision when he first approached the Tribunal.)

4. The starting point in my deliberations in relation to the exercise of the powers in s 920A must be the objects which lie at the heart of the legislative scheme.

5. The banning provisions are found in Chapter 7 of the Corporations Act. Section 760A sets out the main object of Chapter 7. Insofar as it is relevant, that section refers to promoting:

   a)    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

   b)    Fairness, honesty and professionalism by those who provide financial services; …

6. ASIC’s objects are also relevant since the Tribunal steps into ASIC’s shoes and exercises the powers that ASIC exercises. Those objects are set out in s 1 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). Relevantly, ASIC has the objective of promoting “the confident and informed participation of investors and consumers in the financial system” (s 1(2)(b)). To that end, it must take whatever action is required to enforce and give effect to the laws it administers (s 1(2)(g)).

7. When deciding whether a banning order is appropriate, a decision-maker will keep the statutory objectives in mind. But the decision-maker may also have regard to matters like those enumerated by Santow J in Australian Securities and Investments Commission v Adler [2002] NSWSC 483 at [56]. In that case, his Honour pointed out the primary purpose of disqualification (and, by implication, banning) orders was protective rather than punitive, even if an order may incidentally have a punitive impact. In this case, there is good reason to believe the public needs to be protected from the applicant. While he says he has been running a successful financial services business without any evidence of incident or complaint in more recent years, the lack of insight into his own behaviour that was on display during his oral testimony is a matter of real concern. He has learned nothing from this experience.

8. Deterrence is also an important objective here. As I have noted, the experience has not caused the applicant to reflect on his behaviour. He has been able to rationalise what occurred in a way that excuses him from responsibility. A ban is appropriate to bring home the need to avoid conduct of this kind in the future. There is also a need for general deterrence. Others in the market who might be tempted to take a relaxed approach to disclosure requirements, or who are not scrupulously careful with comparison advice, need to understand the law takes these matters seriously. Indeed, they lie at the heart of the objectives of the legislative scheme that I have already discussed.

9. I am conscious of the applicant’s personal circumstances. He went to some lengths to explain the hardship that he and his family have experienced as a consequence of all this. He said his business and reputation have suffered, and his capacity to earn an income is reduced. He pointed out he was using the opportunity of the ban to undertake further study to improve himself. That is welcome. I accept a ban will prolong the hardship. I also accept the applicant has been involved in what are, to some extent, parallel proceedings involving the Financial Planning Association which have caused him embarrassment. Sanctions have been imposed following that process, but they were comparatively minor. None of that suggests to me a ban is inappropriate.

10. Administrative action short of a ban would not be satisfactory given the lack of honesty and professionalism exhibited by the applicant. In all the circumstances I am satisfied a ban is appropriate.

    What should be the length of the banning order?

11. I have had regard to the matters referred to in table 2 of ASIC’s Regulatory Guide 98 Licensing: Administrative action against financial services providers (RG98). I am satisfied table 2 on p 17 of RG98 provides a useful guide to the length of a ban. The table suggests a banning order of 3-10 years is appropriate in cases where there was false or misleading or deceptive conduct. That is certainly the case here. The conduct had real consequences for the applicant’s clients. The applicant also exhibited a thoroughgoing lack of contrition and an absence of insight into his conduct. At a minimum, he demonstrated an unacceptable level of knowledge as to his duties and responsibilities as a financial adviser. While he sought to lay blame for that at the feet of his employer who failed to train and supervise him, the responsibility was ultimately his.

12. The applicant’s misleading or deceptive conduct and the lack of contrition suggests to me he should be banned for longer than the minimum of three years that he sought. Indeed, I considered whether it would be appropriate to impose a longer period than that which the delegate imposed, but there was no discussion of that possibility at the hearing. In the circumstances a ban of five years is clearly appropriate.

    CONCLUSION

13. The decision under review is affirmed.

I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

..............................[sgd].....................................

Associate

Dated: 29 August 2018

Date of hearing:	11 September 2017
Solicitors for the Applicant:	Cheney Suthers Lawyers
Counsel for the Respondent:	Ms R Graycar