Watson and Australian Securities and Investments Commission - [2018] AATA 4677

Watson and Australian Securities and Investments Commission [2018] AATA 4677 (21 December 2018)
Division:TAXATION & COMMERCIAL DIVISION
File Number: 2017/6838
Re:Michael David Watson
APPLICANT

AndAustralian Securities and Investments Commission
RESPONDENT

DECISION
Tribunal:Deputy President Boyle
Date:21 December 2018
Place:Perth

The Tribunal affirms the decision under review.
...............[sgd].........................................................
Deputy President Boyle
CATCHWORDS
TAXATION AND COMMERCIAL DIVISION – Application for Limited Australian Financial Services Licence s 913B(1) – Corporations Act 2001 (Cth) – was the application made in accordance with s 913A – s 913B(1)(a) – no reason to believe applicant likely to contravene obligations if the AFSL is granted – s 913B(1)(b) – financial services covered by the licence provided efficiently, honestly and fairly – conditions on the licence – financial services laws – available adequate financial resources – knowledge of the financial services covered by the licence – good fame and character – decision under review affirmed
LEGISLATION
Administrative Appeals Tribunal 1975 (Cth) – s 25
Corporations Act 2001 (Cth) – s 760A(b), s 911A(1), s 911C, s 912A, s 912A(1)(a),
s 912A(1)(b), s 912A(1)(c), s 912A(1)(d), s 912A(1)(ea), s 912A(1)(f), s 913A, s 913B,
s 913B(1)(a), s 913B(1)(b), s 913B(1)(c), s 913B(2), s 920A(1)(d), s 926B(1)(c), s 1308(8),
s 1311, s 1317B, Sch 3 s 263B
National Vocational Educational and Training Regulator Act 2011 (Cth) – s 21, s 22, s 23, s 24, s 25, s 26, s 27, s 28, s 29, s 35, s 38, s 38, s 133, s 137, s 138, s 139, s 140, s 141, s 142, s 143, s 144, s 145
CASES
Australian Securities and Investments Commission v Avestra Asset Management Limited(in liq) (2017) 348 ALR 525; [2017] FCA 497
Australian Securities and Investments Commission v Camelot Derivatives Pty Ltd (in liq) (2012) 88 ACSR 206; [2012] FCA 414
Australian Securities and Investments Commission v Cassimatis (No 8) (2016) 336 ALR 209; [2016] FCA 1023
Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 357 ALR 240
Beezley v Repatriation Commission (2015) 150 ALD 11
Clemente Group Holdings Pty Ltd and Australian Securities and Investments Commission [2016] AATA 758
CMHV and Director-General of Security and Minister for Foreign Affairs [2017] AATA 1547
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Evans (as executor for the estate of the late Evans) v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs (2012) 289 ALR 237; [2012] FCAFC 81
Felden and Australian Securities and Investments Commission [2003] AATA 301
Irving v Minister for Immigration, Local Government and Ethnic Affairs [1996] FCA 663; (1996) 139 ALR 84
McBride v Walton [1994] NSWCA 199
McDonald v Director-General of Social Security (1984) 1 FCR 354
Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666, 4 ALD 139; 1A IPR 708; 44 FLR 41
One Re Services Limited and Australian Securities and Investments Commission [2012] AATA 294
Power & Ors v Hammond [2006] VSCA 25
Prothonotary of the Supreme Court of New South Wales v Alcorn [2007] NSWCA 288
Prothonotary of the Supreme Court of New South Wales v P [2003] NSWCA 320
Re Davis (1947) 75 CLR 409
Re Holbrook and Australian Postal Commission (1983) 5 ALN No 35
Shi v Migration Agents Registration Authority (2008) 235 CLR 286
Ward v Western Australia (WAG6006 1995 and WAG6002 of 1996) (1996) 69 FCR 20; 136 ALR 557
Williams and Australian Securities and Investments Commission [2018] AATA 2312
WWKJ and Director-General of Security and Minister for Foreign Affairs [2018] AATA 3894
Yao v Minister for Immigration and Border Protection (2014) 140 ALD 21; [2014] FCAFC 17
SECONDARY MATERIALS
Australian Securities and Investments Commission, Regulatory Guide 2: AFS Licensing Kit (September 2017) – RG 2.215, RG 2.211, RG 2.320, RG 2.321, RG 2.321(b), RG 2.328, RG 2.329, RG 2.330 RG 2.239, RG 2.327
Australian Securities and Investments Commission, Regulatory Guide 146: Licensing: Training of financial product advisers (July 2012) – RG 146.4, RG 146.6, RG 146.10, RG 146.43, 146.44, RG 146.58, RG 146.59
Australian Securities and Investments Commission, Regulatory Guide 166: Licensing: Financial Requirements (September 2017) – Appendix 1, RG 166.35, RG 166.36,
RG 166.37, RG 166.44
Corporations Regulations 2001 (Cth) – reg 7.6.01BA, reg 7.6.03
REASONS FOR DECISION
Deputy President Boyle
21 December 2018
THE APPLICATION

The Applicant seeks the review of the Respondent’s (ASIC) decision dated
20 October 2017 (R2, T1.3) to refuse to grant the Applicant a limited Australian Financial Services Licence (Limited AFSL) pursuant to s 913B of the Corporations Act 2001 (Cth) (the Act).
BACKGROUND
The Applicant’s relevant background as set out in ASIC’s Statement of Facts, Issues and Contentions (SFIC) and ASIC’s Opening Submissions, the background of which the Tribunal accepts as correct, is that the Applicant at the time of the application:
(a)held:
(i)a Bachelor of Commerce from the University of Western Australia;
(ii)a Graduate Diploma of Chartered Accounting from the Institute of Chartered Accountants in Australia; and
(iii)a Diploma of Financial Planning from Mentor Education AU; and
(b)was a director and shareholder of:
(i)Advali Accountants Pty Ltd ABN 12 152 080 932 previously known as Watson Finance Pty Ltd (30 March 2016 to 20 February 2017) and before that, Pancontinental Financial Advisers Pty Ltd (24 September 2014 to 30 March 2016);
(ii)Watson Investments Corporation Pty Ltd ABN 37 602 761 437 (Watson Investments) previously Pancontinental Investment Advisers Pty Ltd (2 December 2014 to 30 March 2016);
(iii)Advali Pty Ltd ABN 11 612 996 577; and
(iv)Advali Advisors Pty Ltd ABN 36 620 163 840 (incorporated 30 June 2017).
Advali Accountants Pty Ltd has been a registered agent of ASIC since 14 October 2014 with registered agent number 35302.
From 23 January 2015 to 11 May 2016 the Applicant was authorised representative number 471650 on Australian Financial Services Licence (AFSL) number 226415, held by Merlea Investments Pty Ltd ABN 38 062 546 516 (Merlea).
Merlea’s AFSL authorised Merlea to:
(a)provide Financial Product Advice for the following classes of financial products:
(i)deposit and payment products limited to basic deposit products and deposit products other than basic deposit products;
(ii)debentures, stocks or bonds issued or proposed to be issued by a government;
(iii)life products including investment life insurance and life risk insurance;
(iv)interests in managed investment schemes including: investor directed portfolio services;
(v)retirement savings accounts products;
(vi)securities;
(vii)standard margin lending facility; and
(viii)superannuation.
(b)deal in a financial products by applying for, acquiring, varying or disposing of a financial product on behalf of another person in the following classes of financial products:
(i)deposit and payment products limited to basic deposit products and deposit products other than basic deposit products;
(ii)debentures, stocks or bonds issued or proposed to be issued by a government;
(iii)life products including investment life insurance and life risk insurance;
(iv)interests in managed investment schemes including: investor directed portfolio services;
(v)securities;
(vi)retirement savings accounts products;
(vii)standard margin lending facility; and
(viii)superannuation
to retail and wholesale clients.
Merlea authorised the Applicant and Watson Investments to provide advice in: deposit and payment products; derivatives; government debentures; life products; interests in managed investment schemes; retirement savings accounts; securities; standard margin lending facility; superannuation and miscellaneous financial investment products; and managed discretionary account services to retail and wholesale clients.
In the time that Mr Watson was an authorised representative of Merlea, he did not provide financial services to any clients as an authorised representative of Merlea. This was confirmed by Merlea by letter dated 6 March 2018 to ASIC (R2, T27).
On 30 June 2016 the Applicant applied to ASIC for a Limited AFSL (the Application) (T3).
The Application was in the Applicant’s personal capacity, not on behalf of any entity of which he was a director or shareholder (T3, page 92).
From 30 June 2016 to 18 November 2017 ASIC received information from the Applicant in support of the Application (ASIC’s Outline of Opening Submissions, paragraph 6). Following this period the Applicant provided no additional documentation in support of the Application to ASIC, excluding the information provided in the course of these proceedings.
On 28 July 2017 ASIC informed the Applicant that it was minded to refuse the Application and offered him the opportunity to attend a hearing to make submissions and give evidence in support of the Application (ASIC’s Outline of Opening Submissions, paragraph 7).
The Applicant appeared at the hearing before the delegate of ASIC in person on

6 October 2017 (T1.3, page 38). Both the Applicant and his father, Professor John Watson, made oral submissions at the hearing (T1.3, page 38).
On 20 October 2017 a delegate of ASIC made a decision refusing to grant the Applicant a Limited AFSL (R2, 1.3). That decision included a statement of reasons (R2, 1.3, page

36-43)
It is this decision that is the subject of these proceedings.
THE ISSUES
Issues as identified by ASIC
In its SFIC (R1) ASIC identifies the issues for determination as being:
25.Whether Mr Watson ought be granted a Limited AFSL under s 913A of the Act.
26.In order for Mr Watson to be successful, the Tribunal must be satisfied that:
a.The Application was made in accordance with s 913A of the Act: s 913B(1)(a) (Issue 1); and
b.There is no reason to believe that Mr Watson is likely to contravene the obligations that will apply under s 912A if the AFSL is granted: s913B(1)(b) (Issue 2); and
c.There is no reason to believe that Mr Watson is not of good fame and character: s913B(c) (sic) (the Tribunal assumes that this is meant to be a reference to s 913B(1)(c) of the Act) (Issue 3).
27.The following obligations under s 912A are relevant to Issue 2 in the present case:
a.do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly: s 912A(1)(a);
b.comply with the conditions on the licence: s 912A(1)(b);
c.comply with the financial services laws: s 912A(1)(c);
d.have available adequate financial resources: s 912A(1)(d); and
e.knowledge of the financial services covered by the licence: s 912A(1)(ea) (see Corporations Regulations 2001 (Regulations) regulation 7.6.01BA).
Issues as identified by the Applicant
Standard initial directions were made in these proceedings on 9 February 2018 pursuant to which the Applicant was to file his Statement of Facts, Issues and Contentions (the Applicant’s SFIC) and any further evidence on or before 6 April 2018. By further directions made on 4 April 2018 and 13 April 2018 the time for the Applicant to file the SFIC and further evidence was extended to 19 April 2018. The Applicant’s SFIC, which included documentary evidence, was filed on 17 April 2018 (A1).
The Applicant’s SFIC did not identify the substantive legal issues for determination by the Tribunal in any discernible way. Although the documents filed by the Applicant (A1) comprised 304 pages, the SFIC itself was only two and a half pages. The balance of the documents was the Application made to ASIC and other evidence including extensive correspondence with ASIC through the period leading up to the reviewable decision. Insofar as the two and a half page SFIC referred to “issues” it was, in the second paragraph (A1, page 4 of 304), stated to be “…key issues that …discredit the process undertaken by ASIC in relation to [the] application for a limited AFS license and demonstrate that I do…meet all of the criteria for receiving a limited AFS license.”
The Applicant also filed Closing Submissions after the hearing and after ASIC provided Closing Submissions. Again, however, the Applicant’s Closing Submissions did not contain a specific identification of the issues for determination in these proceedings, but rather went to “issues” of evidence which, in the Applicant’s submission, “demonstrate compliance with the Corporations Act section 913B” and in particular the satisfaction of subsections “(1)(a), (b), (c), (ca) and (d); (2); and (4)(a), (b) and (c)” (Applicant’s Written Closing Submissions, filed 20 October 2018, paragraph 3).
While expressed very differently, and mindful of the fact that the Applicant was not legally represented, the effect of the Applicant’s SFIC and Closing Submissions is, in the Tribunal’s view, that the issues identified by ASIC as set out in [15] above are the issues to be determined by the Tribunal.
THE HEARING AND THE EVIDENCE
The application was heard on 23 and 24 July 2018.
The Applicant represented himself with the assistance of his father, Professor John Watson. ASIC was represented by Ms T L Jonker.
The following documents were put into evidence at the hearing:
·Applicant’s Statement of Facts, Issues and Contentions with attachments (304 pages) received 17 April 2018 (Exhibit A1);
·Mentor Education – Course Outline (Exhibit A2);
·Web-capture of the Applicant’s profile on the Advali website dated 23 July 2018 (Exhibit A3);
·Respondent’s Statement of Facts, Issues and Contentions received 23 March 2018 (Exhibit R1);
·Tribunal Documents and Supplementary Tribunal Documents (T1.1 to T31) received 30 April 2018 (Exhibit R2);
·Witness statement of Mr Hock Peng Lee dated 23 March 2018 and attachments “HPL-1” to “HPL-13” (Exhibit R3);
·Historical company extracts (four) dated 20 July 2018 (Exhibit R4);
·Documents contained in Zip file accompanying email of 27 July 2017 (Exhibit R5);
·
Witness statement of Hock Peng Lee dated 20 July 2018 with attachments

“HPL-1” and “HPL-2” (Exhibit R6);
·Response to ACORN Report dated 18 June 2018 (Exhibit R7); and
·Commonwealth Bank correspondence dated 18 June 2018 and three photographs labelled “Office Break-in” (Exhibit R8).
The Applicant and Professor Watson gave evidence and were cross-examined by Ms Jonker. Hock Peng Lee was the sole witness called by ASIC and he was cross-examined by Professor Watson. Mr Lee, who described himself as a senior manager in the licencing team at ASIC (Transcript page 142), had provided two witness statements, R3 dated

23 March 2018 and R6 dated 20 July 2018.
At the conclusion of the hearing orders were made for the provision of closing submissions as follows:
(a)ASIC’s Closing Submissions by 3 September 2018; and
(b)Applicant’s Closing Submissions by 15 October 2018.
At the request of ASIC on 23 October 2018, a direction was made on that day for ASIC to file and serve any submissions in response to the Applicant’s closing submissions by

26 October 2018.
Submissions were filed and served by the parties generally in accordance with the directions referred to in [24] and [25] above.
THE ROLE OF THE TRIBUNAL IN THE APPLICATION
While the Tribunal would not normally need to comment on its role in reviewing a decision under the relevant statutory provisions and jurisprudence, in this case, because of the matters raised by the Applicant, it is appropriate to do so.
The application for review is made pursuant to s 1317B of the Act (and see also s 25 of the Administrative Appeals Tribunal Act (1975) (Cth) (the AAT Act)).
The role of the Tribunal in such a review is to determine for itself what is the correct or preferable decision: Shi v Migration Agents Registration Authority (2008) 235 CLR 286 (Shi). The Tribunal is not limited to reviewing ASIC’s, or in this case the delegate’s, decision for legal or other error, but rather conducts its own de novo assessment and determination of the matter. Its role is “to do over again” what the original decision maker did: see Yao v Minister for Immigration and Border Protection (2014) 140 ALD 21; [2014] FCAFC 17 at [41] per Perry J (White and Wigney JJ agreeing), referring to Shi at [100] (per Hayne and Heydon JJ) and [37] (Kirby J). See also Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 and reference to that case in CMHV and Director-General of Security and Minister for Foreign Affairs [2017] AATA 1547 at [37] and WWKJ and Director-General of Security and Minister for Foreign Affairs [2018] AATA 3894 at [43] and [44].
In undertaking this task, the Tribunal is entitled to consider all the material before it and is not limited to consideration of only the material that was before the delegate.
Accordingly, the Tribunal is to decide what is the correct or preferable decision at the time it makes its decision, rather than at the time of the original decision: Shi at [41]-[51] per Kirby J; at [99]-[101] per Hayne and Heydon JJ.
While it has been held that there is no onus of proof in the Tribunal (see McDonald v Director-General of Social Security (1984) 1 FCR 354), the party seeking the request (an applicant) carries what has been described as a common sense onus in the sense that they must prove what they assert: Re Holbrook and Australian Postal Commission (1983) 5 ALN No 35 at [23] per by Deputy President Todd; and see further Beezley v Repatriation Commission (2015) 150 ALD 11 at [68] wherein the Full Court of the Federal Court found:
[68] In any case before a merits review tribunal (or a first instance decision-maker), a decision can only be made on the basis of relevant and probative material. The material must be probative of the matters for which the statute provides: see Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666, 4 ALD 139; 1A IPR 708; 44 FLR 41 per Deane J. If an applicant does not provide evidence and information sufficient to meet the statutory requirements, an applicant is unlikely to have the statutory power exercised in her or his favour. And unless and until a decision-maker is satisfied, or persuaded, that the requirements are met, then no occasion to exercise the power in favour of an applicant arises. In that sense, as a practical matter, it is not incorrect to say that a person “must satisfy” the requirements in the statute. To say that is not to impose an onus of proof on an applicant, but rather to recognise the operation of the legislative scheme under which the person seeks a benefit or interest: see generally, McDonald v Director-General of Social Security (1984) 1 FCR 354 at 356–7 and 358; 6 ALD 6 at 9–10 and 11 (per Woodward J), at FCR 366; ALD 19 (per Northrop J) and at FCR 369; ALD 21 (per Jenkinson J); Ward v Western Australia (WAG6006 1995 and WAG6002 of 1996) (1996) 69 FCR 208 at 215–8; 136 ALR 557 at 565–8; and Evans (as executor for the estate of the late Evans) v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs (2012) 289 ALR 237; [2012] FCAFC 81 at [18] and the cases there cited.
In the present case the Tribunal must, standing in the shoes of ASIC, irrespective of ASIC’s original decision, be satisfied that the Applicant meets the requirements to be granted the Limited AFSL.
LEGISLATIVE FRAMEWORK
Section 913A of the Act provides:
A person may apply for an Australian financial services licence by lodging an application with ASIC that:
(a)includes the information required by regulations made for the purposes of this paragraph; and
(b)is accompanied by the documents (if any) required by regulations made for the purposes of this paragraph.

Regulation 7.6.03 of the Corporations Regulations 2001 (the Regulations) provides that for the purposes of s 913A(a) of the Act, an individual applicant is required to provide:
…
(f)a description of the financial services that the person proposes to provide;
(g)the arrangements (including a description of systems) by which the person will comply with its general obligations set out in section 912A of the Act;
(h)any other information that ASIC requires for the purpose of considering the application.
ASIC application form FS01, by which relevant applications are made, requires an AFSL applicant to provide proofs of adequacy of resources – financial statements and financial resource details. The Application was made on form FS01 (R2, T3).
ASIC has published:
(a)“Regulatory Guide 166: Licensing: Financial Requirements” (RG 166) (R2, T29) which explains ASIC’s policy on financial requirements for licensing; and
(b)“Regulatory Guide 2: AFS Licensing Kit” (RG 2) (R2, T30) which explains how an applicant must demonstrate that they have sufficient financial resources to provide the financial services in respect of which an application is made: RG 2.211 (R2, T30, page 613).
RG 2.215 (R2, T30, page 614) provides that an AFSL applicant must provide the “B5 Financial Statements and Financial Resources core proof” (B5 Financial Resources).
The B5 Financial Resources proof outlines the following information contained in

RG 2.321(b) (R2, T30, page 633):
(b)provide a description of your processes for ensuring that you comply with RG 166, including your processes for:
(i)     monitoring and reporting on financial obligations, including reporting lines and the frequency of reporting;
(ii)    ensuring that you have adequate funds to properly carry out your responsibilities under your AFS licence, now and in the future; and
(iii)    ensuring compliance with all ongoing record-keeping obligations.
RG 2.320 (R2, T30, page 633) provides that the information in RG 2.321 is required by ASIC to assess whether an applicant has adequate financial resources available to them to comply with their obligations as an Australian Financial Services (AFS) licensee.
RG 2.328 (R2, T30, page 634) provides that the base level requirements in Section B of RG 166 apply to all applicants except bodies regulated by the Australian Prudential Regulation Authority, and market and clearing participants that are exempt from them under Appendix 1 of RG 166.
Pursuant to RG 2.329 (R2, T30, pages 634-635), an applicant is required to provide financial statements which must include:
a.a balance sheet;
b.an income statement (if already operating); and
c.a statement of cash flows (if already operating).
RG 2.330 provides that the financial statements submitted under RG 2.239 must:
a.be no more than three months old; and
b.if unaudited, be signed by the authorised person, which for an individual, is that person (RG 2.331).
RG 2.327 provides that any financial documents submitted to ASIC, except for cash flow projections, must comply with all relevant accounting standards. Relevant accounting standards include the Australian Accounting Standards.
In respect of cash flow projections:
a.an AFS licensee must have sufficient resources to meet anticipated cash flow expenses (cash needs requirement): RG 166.35 (R2, T29, page 458);
b.the cash needs requirement can be met by choosing one of five options including Option 1 “reasonable estimate projection plus cash buffer”: RG 166.36; RG 166.37 (R2, T29, page 458);
c.RG 166.44 (R2, T29, page 460-461) provides that where Option 1 is chosen, the applicant must:
(i)prepare a projection of cash flows (inflows and outflows) over at least the next three months; and
(ii)document the applicant’s calculations and assumptions and describe in writing why they are appropriate assumptions; and
(iii)update the projection of cash flows when it ceases to cover the next 3 months, or if the applicant has reason to suspect that an updated projection would show the applicant is not meeting his / her AFSL conditions.
Sections 913B(1)(a) and (b) of the Act provide:
913BWhen a licence may be granted
(1)ASIC must grant an applicant an Australian financial services licence if (and must not grant such a licence unless):
(a)the application was made in accordance with section 913A; and
(b)ASIC has no reason to believe that the applicant is likely to contravene the obligations that will apply under section 912A if the licence is granted;…
The Act may be amended by regulation. Section 926B(1)(c) of the Act provides:
Exemptions and modifications by regulations
(1)The regulations may:
(a)…
(b)…
(c)provide that this Part applies as if specified provisions were omitted, modified or varied as specified in the regulations.
Regulation 7.6.01BA of the Regulations relevantly provides:
Modification of section 912A of the Act
(1) …
(2)For paragraph 926B(1)(c) of the Act, Part 7.6 of the Act applies as if section 912A of the Act were modified by inserting after paragraph 912A(1)(e) the following paragraphs:
“(ea)for a limited licensee who is an individual–maintain knowledge of the financial services covered by the licence; …”
Section 912A(1) of the Act provides:
(1)A financial services licensee must:
(a)do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly; and
(aa)…
(b)comply with the conditions on the licence; and
(c)comply with the financial services laws; and
(ca)…
(cb)…
(d)subject to subsection (4)—have available adequate resources (including financial, technological and human resources) to provide the financial services covered by the licence and to carry out supervisory arrangements; and
(e)…
(f)ensure that its representatives are adequately trained (including by complying with section 921D), and are competent, to provide those financial services; …
ASIC has published “Regulatory Guide 146: Licensing: Training of financial product advisers” (RG 146) (R2, T31) which sets out minimum standards for the training of advisers.
RG 146.4 (R2, T31, page 670) provides that “[a]ll natural persons who provide financial product advice to retail clients must meet the training standards”.
RG 146.6 (R2, T31, page 670) provides that the training standards, which are described therein as “sets of knowledge and (in some cases) skill requirements”, must be met by advisers before they give advice.
RG 146.10 (R2, T31, pages 671-672) summarises what individual advisers must do to meet the training standards. Advisers who provide advice on Tier 1 products must either:
a)complete courses on the ASIC Training Register that meet the relevant training standards, i.e. they are at the Tier 1 level and cover:
(i)the generic knowledge relevant to the products the adviser provides advice on and the markets in which the adviser operates,
(ii)the specialist knowledge about the specific products the adviser provides advice on and the markets in which the adviser operates, and
(iii)the relevant skills requirements; or
b)the adviser must be individually assessed by an authorised assessor against the relevant training standards.
RG 146.58 (R2, T31, page 686) provides that “[t]he characteristics of Tier 1 courses are broadly equivalent to the ‘Diploma’ level in the Australian Qualifications Framework”.
RG 146.59 (R2, T31, page 686) provides that it is not necessary for advisers to undertake a formal diploma course and that the reference to this qualification is for comparative purposes only, as a guide for licensees, training providers and authorised assessors on the level of the required content of the course.
RG 146.43 (R2, T31, page 682) provides that a:
…person advising on self-managed superannuation funds (SMSFs) must complete, as a minimum, the Tier 1 training requirements for superannuation. To comply with the training requirements, the adviser must have knowledge of all superannuation products, even when the adviser is advising only on one superannuation product.
RG 146.44 (R2, T31, page 682) provides that:
…if an adviser has previously undertaken training on superannuation, but this did not sufficiently cover SMSFs, the adviser should undertake additional specific product training in relation to SMSFs before advising on these products.
It is unlawful for a person or entity to carry on a financial services business unless they hold an AFSL covering the provision of the financial services: s 911A(1) of the Act. A financial services business means “a business of providing financial services”: s 761A of the Act. A person or entity provides financial services if they provide financial product advice: s 766A(1)(a) of the Act.
A person must not hold out that the person has an AFSL if that is not the case: s 911C(a) of the Act.
A person must not hold out that conduct, or proposed conduct, of the person is within authority in relation to a particular financial services licensee if that is not the case:

s 911C(d) of the Act.
Failure to comply with s 911C of the Act is an offence: s 1311 of the Act and s 263B in Sch 3, of the Act.
CONSIDERATION
As noted at [27] above, it is a little unusual in a case such as this to set out what it is that the Tribunal is charged with doing in the proceedings. The reason that it is appropriate to do so in the present case is that a significant portion of the Applicant’s SFIC and his closing submissions raised concerns and complaints about the way that he had been treated by ASIC and the conduct of certain ASIC officers. Allegations of misconduct, perjury, fraud, poor ethical conduct and bullying were made against ASIC’s officers in the Applicant’s Closing Submissions (paragraphs 30 and 37). The Applicant’s Closing Submissions also raised arguments that ASIC’s conduct, or ASIC’s refusal to grant the Limited AFSL (it is not clear which), breached the Australian Constitution (paragraph 36) and that the refusal to grant the Limited AFSL was a breach of the Australian Human Rights Commission Act 1986 (paragraph 36). Those closing Submissions also made reference to the Banking Royal Commission (paragraph 37).
As was pointed out to the Applicant at the hearing, these sorts of allegations and issues are not relevant to the task to be undertaken by the Tribunal. The Tribunal’s task is as set out in the passages quoted at [29]-[32] above. The need for the Applicant to focus on the issues relevant to the task to be undertaken by the Tribunal was made clear to the Applicant on the morning of the first day of the hearing on 23 July 2018 when the submissions being made by Professor Watson on behalf of the Applicant started to stray into complaints about ASIC’s handling of the Application; how the Applicant had been “targeted and bullied”; and matters raised in the Banking Royal Commission and the role of whistleblowers (Transcript pages 4-6). Following an objection made by ASIC’s counsel, the Tribunal made the following comments to Professor Watson:
DEPUTY PRESIDENT: And I might also say this. Whilst I appreciate there’s some frustration on your part, … about ASIC’s inability to be able to actually identify what it is they needed and what the deficiencies were,…, and whilst you may have complaints about the way ASIC’s handled the matter, they’re not strictly relevant to the more mundane issue or the more central issue which I have to look at as to whether or not the application was firstly made in accordance with the Act and the Regulations, and then secondly, whether the -it’s effectively the issues raised by ASIC as to the potential breaches or the likely breaches of section 912A of the Corporations Act. They’re really the central issues for determination. So I think if you just concentrate on those, then we…
…
DEPUTY PRESIDENT: Yes, I think the statement of facts, issues and contentions, and the opening that have been provided by ASIC do identify what the issues are, and the role of the Tribunal and the role of the parties is to convince – satisfy the Tribunal that, in your case that the application was made in accordance with the somewhat difficult to follow regulations, and there will emerge through that process whether the cash flows balance sheets and so on that were provided to comply with the Regulations and the Act.
…
DEPUTY PRESIDENT: And they are the key issues. The first issue is whether or not it was made in accordance with 913A, and that’s the totality of the information provided given that 913A is fairly heavily also bound up in regulations. So unfortunately I’ll have to grind through those to satisfy myself that it was in accordance with those, and then if that, if you like, threshold issue is determined, it’s whether or not there is reason to believe that Mr Watson will contravene his obligations…. there’s no particular onus of proof on either party in the tribunal, but it’s been expressed in various ways, probably the simplest is it’s a common sense approach…
So, insofar as ASIC as the respondent has identified its concerns or its assertions as to the application of material put before ASIC and then the tribunal standing in the shoes of the decision-maker of the failure or the non-existence of evidence which would establish that the services are likely to be provided in accordance with 912A(1)(a) which is to efficiently, honestly and fairly comply with the conditions of the licence, and it’s really those matters set out at paragraph 41 of the respondent’s opening submissions as they’re probably more fully detailed in paragraph 42 or the headings that appear after that, the adequate financial resources; the knowledge of the applicant, remembering that it is an individual making the application here; and then 47, the efficient, honest and fair provision of the services; and then the sort of catch-all remaining obligations dealt at paragraph 51, and then the final hurdle, if you like, is the satisfaction of good faith and character.
So they are the issues really, I think, that we need to focus on today,…
(Transcript pages 6-8)
Insofar as the Applicant’s SFIC and the Applicant’s Closing Submissions do not relate to the issues relevant to the task to be undertaken by the Tribunal as identified above, the Tribunal will not address them.
Issue 1: Is the Application made in accordance with s 913A of the Act?
In relation to the Applicant’s failure to provide information and documents complying with the requirements identified in [34] to [45] above, ASIC’s SFIC submits (paragraphs 45 to 55):
Information provided by Mr Watson
45.On 30 June 2016, Mr Watson provided to ASIC financial statements in the name of Watson Finance (now known as Advali Accountants) (R2, T3, pages 133-136) being:
a.“Cash needs requirement: Option 1”;
b.Income statement for year ended 30 June 2016;
c.Balance sheet for year ended 30 June 2016; and
d.Statement of cash flows for year ended 30 June 2016.
46.On 25 May 2017, Mr Watson provided to ASIC (R2, T5, page 141):
a.cash flow projections in his own name and ABN for 2017, 2018, 2019, 2020, 2021, 2024 and 2034; and
b.balance sheet projections in his own name and ABN for 2017, 2018, 2019, 2020, 2021, 2024, 2034.
47.On 14 June 2017, Mr Watson provided to ASIC (R2, T7, pages 159-164)
a.in relation to Advali Accountants:
(i)     A balance sheet as at 30 April 2017;
(ii)    Actual cash outflows from 1 February 2017 to 30 April 2017; and
(iii)    Cash projections from July 2017 to September 2017;
b.a balance sheet in the name of Michael Watson ABN 20 329 610 218 as at 31 May 2017; and
c.a document headed “Cash Buffer Requirement” that does not specify to which entity it relates.
48.On 5 July 2017, Mr Watson re-submitted to ASIC the documents set out in paragraph 4744 (sic) (Tribunal assumes that this should be a reference to paragraph 47) above (R2, T11, pages 190-195).
Deficiencies in information provided
49.With the exception of the balance sheet provided on 14 June 2017, the financial statements provided by Mr Watson in support of the Application from 30 June 2016 to 14 June 2017 did not satisfy the requirements of RG 2.329 and 2.330 and RG 166.36, RG 166.37 and RG 166.44.
50.The documentation provided on 30 June 2016 did not satisfy RG 2. 329 (sic) because it was financial information concerning Advali Accountants, not Mr Watson.
51.The documentation provided to ASIC on 25 May 2017 was deficient in the following ways:
a.the cash flow projections were not for the next three months and did not document any assumptions or describe in writing whey (sic) they were appropriate assumptions and therefore did not satisfy RG 166.44;
52.The documentation provided to ASIC on 14 June 2017 was deficient in the following ways:
a.the balance sheet, actual cash outflows and cash projections in the name of Advali Accountants were not financial information in relation to Mr Watson; and
b.the “Cash Buffer Requirement” does not specify to which entity it relates.
53.The balance sheet provided by Mr Watson on 14 June 2017 satisfies the requirements of RG 2.329 and 2.330.
54.However, Mr Watson has not provided ASIC with:
a.a cash flow projection in his personal capacity that satisfies the requirements of RG 166.44; or
b.B5 Financial Resources proof which satisfies the requirements of RG 2.321(b).
55.Accordingly, the Application is not an application made in accordance with

s 913A of the Act as required by s 913B(1)(a) of the Act.
In its Closing Submissions ASIC submitted that (at [21]):
The applicant, during the course of the hearing and in cross-examination, could not and did not point to:
a.any cash flow projection in his personal capacity which satisfies the requirements set out in RG 166.36; 166.37; 166.44 and as outlined in ASIC’s SFIC at [43] – [44] and ASIC’s Opening Submissions at [32.a]; or
b.a B5 Financial Resources proof which satisfies the requirements of RG 2.321(b)(ii) (ASIC Doc T30 at 633) and as outlined in ASIC’S SFIC at [34] – [44] and ASIC’s Opening Submissions at [32.b].
ASIC submits at paragraph 22 of its Closing Submissions that, on that ground alone, the Application must fail.
ASIC’s Closing Submissions go on to submit:
B5 Proof
23.Regulation 7.6.03 provides that the applicant must provide:
(g)a. a description of the financial services the person intends to provide;
(h)b. the arrangements (including a description of systems) by which the person will comply with the obligations set out in s 912A of the Act;
(i)c. any other information ASIC requires for the purpose of considering the application.
24.RG 2.321(b) required the applicant to provide a description of the applicant’s processes for ensuring compliance with RG 166 including the applicant’s processes for:
i.       monitoring and reporting on financial obligations, including reporting lines and the frequency of reporting;
ii.      ensuring that you have adequate funds to properly carry out your responsibilities under your AFS licence, now and in the future; and
iii.     ensuring compliance with all ongoing record-keeping obligations.
25.The application form submitted by the applicant specified that ASIC required the applicant to provide a B5. Adequacy of Resources Proof (B5. Proof): (ASIC Docs T3 at 102 “B5. Adequacy of Resources”).
26.Despite being given every opportunity to point out material that might go to the substance of what was required to be in the B5 Proof: Transcript 35:33-40, the applicant did not, at any point during the hearing, point to any such material.
27.The applicant first claimed that the material was contained in a zip file which he asserted had been deleted by ASIC: Transcript 36:18-34; 37:26-37. When the contents of the zip file (exhibit R5 which is identical to ASIC Docs T1.5) did not reveal any such information he suggested that there was an earlier email: Transcript 65:20-23; 69:20-29, but ultimately did not point to any such evidence.
(R2, T30, page 633)

The Tribunal agrees with ASIC’s summary. In this instance the Tribunal specifically asked the Applicant whether he could point to information which would satisfy the requirements of RG 2.321(b) (R2, T30, page 633) which requires the provision of:
…a description of your processes for ensuring that you comply with RG 166, including your processes for:
(i)monitoring and reporting on financial obligations, including reporting lines and frequency of reporting;
(ii)ensuring that you have adequate funds to properly carry out your responsibilities under your AFS licence, now and in the future; and
(iii)ensuring compliance with all ongoing record-keeping obligations.
The following exchange took place (Transcript pages 34-35):
DEPUTY PRESIDENT: Mr Watson, I’m wondering if you’ve been able to find any information that – ignoring the fact of financial capacity or information going to financial capacity, whether there is any information which would satisfy the requirement for material setting out the processes for monitoring and reporting on the financial obligations, and that’s the financial obligations under the Act and the Regulations, and the process for ensuring compliance with all ongoing record-keeping obligations; remembering that it may well be that you do have those qualifications, but the requirement is to put the material before ASIC in making the application to show that there are processes to ensure—
…
MR M WATSON: Okay. On the original application the only evidence in regards to the reporting lines was on page 40. That’s just a small organisational chart. But ASIC requested so many – there were so many emails from ASIC requesting different information, I’m just struggling to find the one about the processes, because I know it did come up. It might well be that I didn’t include it in my submission. We got to 304 pages, there was just so much information. I’m just trying to read the emails to see if I can get a date on when I provided some more information in regards to this and in regards to the structure and the processes of the business to support the cash-flows and my requirements there.
The Applicant was unable to identify any documents in the T documents or elsewhere that would have satisfied the requirements of that regulation but said that he thought such information had been sent in a zip file to ASIC. As ASIC notes in its Closing Submissions, when checked, that claim by the Applicant was confirmed not to be the case.
Professor Watson in explaining why documents describing the processes as required by RG 2.321 had not been provided made the following comments (Transcript page 32):
MR J WATSON: … I was going to say, in terms of “ensuring compliance with ongoing record keeping obligations”, he’s been a tax agent for years, and chartered accountant for years, we thought these things were obvious, I don’t know – what’s he got to write down? “I’m going to make sure I get up in the morning and lodge my tax return.” I don’t understand the requirements I guess, and I like to think I’m not an idiot. But it does not make any sense to me. The second one, the middle one, is (indistinct) to the cashflows. The other two, I do not understand them.
It was in this context that the Tribunal advised the Applicant at the hearing (Transcript page 33):
DEPUTY PRESIDENT: … I would need to make sure that I had been taken to all of the relevant documentation or some other evidence, and it’s really documentation which would satisfy perhaps the difficulty to understand that regulation 2.321 that requires a description of processes, including those three things. Are you able to actually point to anything that would fit into that category?
In the end the Applicant was not able to point to documents that satisfied the requirements of RG 2.321.
Cash flow projections
As ASIC points out in its Closing Submissions (paragraph 36 onwards), RG166.44 (R2, T29, 460) required the Applicant to provide a projection of cash inflow and outflow (cashflows) over at least the next three months and to “document your calculations and assumptions, and describe in writing by they are appropriate assumptions”.
As noted earlier, the cash flows provided by the Applicant (R2, T3, pages 132-136) were in the name of Watson Finance Pty Ltd, not the Applicant. Further, the Applicant did not provide any calculations or assumptions used in the projections or explanation in support for any assumptions as required.
The cash flow projections (R2, T5), although in the name of the Applicant, did not document any calculations or assumptions or describe in writing why they are appropriate assumptions. This was conceded by the Applicant (Transcript pages 61 and 64).
The cash flow projection provided by the Applicant (R2, T7, page 163) similarly did not comply with the requirements of the Regulations. First, it does not relate to the Applicant but to Advali Accountants Pty Ltd. Second, it does not document the Applicant’s calculations and assumptions or describe in writing why they are appropriate assumptions. This had been pointed out to the Applicant by ASIC in an email to the Applicant on 26 May 2017 (R2, T7, page 152). Further, at the hearing, the Applicant confirmed that the document headed “cash buffer requirement” (R2, T7, page 164) related to Advali Accountants Pty Ltd, not the Applicant (Transcript page 62).
Similarly the “Projected Monthly Cash Outflows” (R2, T1.5, page 70) (identical to the zip file being exhibit R5) do not comply with the requirements of the Regulations because it does not document the Applicant’s calculations and assumptions or describe why the assumptions are appropriate.
ASIC in its Closing Submissions also draws attention to the fact, conceded by the Applicant in cross-examination (Transcript page 65; para [43] of ASIC’s Closing Submissions), that the Applicant’s Actual Monthly Cash Outflows document provided by him to ASIC (R2, T1.5, page 65) included a $600,000 amount as “Cash Held” which was in fact cash held by Advali Accountants Pty Ltd, a company of which Professor Watson was a director at that time. That money had ceased to be available when Professor Watson resigned as a director.
This, ASIC contends, should cause the Tribunal to treat with caution the cash flows provided by the Applicant given his conflation of financial information relating to Advali Accountants Pty Ltd and the Applicant (para [44] of ASIC’s Closing Submissions). The Tribunal agrees. This is not the only example of this occurring given the other circumstances identified above in which the Applicant has provided financial documents in support of the Application for the Limited AFSL which relate to corporate entities with which he is or was associated.
How does the Applicant respond to these failures to comply with the requirements for documentation prescribed by the legislation and the Regulations? The answer is, unfortunately, that it is not clear. The details of ASIC’s claims of the Applicant’s failure to comply with the Act and the Regulations were set out in ASIC’s SFIC which was provided on 23 March 2018. The Applicant was provided with the T documents (T1-T24) in December 2017 and T25-T31 in April 2018. The Applicant’s SFIC received on

17 April 2018, however, does not respond to these allegations detailed in ASIC’s SFIC on a point-by-point basis. As noted earlier, the Applicant’s SFIC is a two and a half page document that, in the Applicant’s words, “discredit(s) the process undertaken by ASIC in relation to my application” and then goes on to:
(a)note that the process has taken 11 months (paragraph 1);
(b)assert that ASIC had not stated that the original information provided was deficient (paragraph 2);
(c)note that the Application was drafted by Professor Watson who taught accounting at the University of Western Australia for 40 years;
(d)note that the Applicant has repeatedly provided further financial information and that ASIC has ever (sic) come back with any specific comments as to why the information provided was not adequate;
(e)claim that an officer of ASIC had on 31 July 2017 advised the Applicant that he would arrange to have the Application approved;
(f)say that the documentation and evidence was presented to the delegate at the ASIC hearing on 5 October 2017;
(g)say that the delegate’s decision to refuse the Application and various correspondence from ASIC refers to the Application as being one for an AFSL whereas the Application is for a Limited AFSL (paragraph 3);
(h)note that the delegate suggested that he withdraw the Application and reapply but that that would have meant that the granting of a Limited AFSL that applied to accountants was a once-off concession which required an application to have been made by 30 June 2016 would not apply to any new application;
(i)note that he has completed a Diploma in Financial Planning and “almost completed” an Advanced Diploma in Self-Managed Super Funds (SMSFs);
(j)note that in his view he meets the educational requirements for a full (not limited) AFSL, in particular that as he has completed a Diploma in Financial Planning and has almost completed an Advanced Diploma in SMSFs, he felt that he more than meets the educational requirements for a Limited AFSL;
(k)note that he was appointed as an ASIC registered authorised representative for Merlea in January 2015 and that that would not have happened if he did not have the appropriate background/ knowledge and before that he worked for The Wealth Designers;
(l)assert that in relation to the matters that ASIC raises in relation to him not being a person of good fame or character, those matters arose at a time after he should have already been granted his Limited AFSL (paragraph 4);
(m)claim that his conviction, being one of the matters raised by ASIC, was a “miscarriage of justice”;
(n)note that he has been a registered ASIC agent and that during that time ASIC did not receive any complaints from his clients; and
(o)claim that ASIC continuously failed to provide adequate explanations as to why the information that he had provided did not satisfy the requirements of the legislation and the Regulations (paragraph 5).
The balance of the Applicant’s SFIC is as described in [17] above.
The Applicant’s Closing Submissions, prepared after ASIC’s Closing Submissions, likewise, does not address the specific allegations of ASIC as to the failure of the Application to comply with the requirements of the Act and the Regulations in any easily identifiable way. The specific non-compliances identified by ASIC in its SFIC and its Closing Submissions are not addressed other than by repeated assertions that the Application did comply and that the Applicant has met all of the requirements. There is, for instance, no attempt to address the non-compliance of the information and the documentation identified in ASIC’s SFIC. No answer is provided to the Applicant’s failure to provide B5 Proof (RG 2.321) compliant information (see [65] – [74] above) on which the Applicant was cross-examined and which he and Professor Watson conceded (as they had to) did not comply or to the failure by the Applicant to provide cash flow and other financial information which complied with the requirements of the Regulations (see [75] to [81] above).
The Tribunal accepts that the information provided in the Application did not comply with the Regulations and the Act and that therefore the Application was not made in accordance with s 913A of the Act. That being the case the Tribunal necessarily finds that pursuant to s 913B(1)(a) of the Act an AFSL must not be granted to the Applicant. Issue 1 is therefore determined against the Applicant.
That finding means that it is not necessary to proceed to consider the other two issues identified in [15] above.
For the sake of completeness, however, the Tribunal will address the second and third issues.
Issue 2: There is no reason to believe that the Applicant is likely to contravene the obligations that will apply under s 912A if the AFSL is granted: s 913B(1)(b)
By operation of s 913B(1)(b) of the Act, an AFSL must not be granted unless the Tribunal has no reason to believe that the Applicant is likely to contravene the obligations that will apply under s 912A of the Act if the AFSL is granted.
This being a licensing application (and not a decision regarding banning or cancellation of a licence), the Tribunal must be positively satisfied that it has “no reason to believe” that the Applicant will not comply with its obligations: Clemente Group Holdings Pty Ltd and Australian Securities and Investments Commission [2016] AATA 758 (Clemente) at [8]-[10] wherein Senior Member Toohey observed:
8.Section 913B(1)(b) requires the Tribunal to determine whether there is “no reason to believe” that the applicant is likely to contravene the obligations that attach to a financial services licence. The test is cast differently from that in respect of decisions concerning banning or cancellation, where it is sought to interfere with an existing right, and where the Tribunal is required to have “reason to believe” that the applicant will not comply with its obligations: s 920A.
9. The distinction is an important one. In a licensing application, the Tribunal must be positively satisfied that it has “no reason to believe” that the applicant will not comply with its obligations. In One Re Services Limited and Australian Securities and Investments Commission [2012] AATA 294, Senior Member Redfern observed at [56]:
The test is more difficult [than for banning or cancellation] to establish for an applicant seeking the right to be licensed as it is clear from the words of the section that the applicant must establish the negative to the reasonable satisfaction of the decision-maker.
10.There is no onus of proof in administrative proceedings: McDonald v Director-General of Social Security (1984) 1 FCR 354. However, an applicant will need to provide the Tribunal with sufficient information about its capacity to meet the general obligations of a licensee to enable the Tribunal to be “reasonably comfortable”, on the evidence, of its determination: see Felden and Australian Securities and Investments Commission [2003] AATA 301.
The Tribunal’s belief must rest on objective facts that would induce the relevant state of mind in a reasonable person: Power & Ors v Hammond [2006] VSCA 25 at [106].
In One Re Services Limited and Australian Securities and Investments Commission [2012] AATA 294 at [56], Senior Member Redfern (as she then was) made the following observation:
The test is more difficult [than for banning or cancellation] to establish for an applicant seeking the right to be licensed as it is clear from the words of the section that the applicant must establish the negative to the reasonable satisfaction of the decision-maker.
ASIC identifies (ASIC’s Opening Submissions, paragraph 41) the following subsections of s 912A(1) as being relevant:
a.do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly: s 912A(1)(a);
b.comply with the conditions on the licence: s 912A(1)(b);
c.comply with the financial services laws: s 912A(1)(c);
d.have available adequate financial resources: s 912A(1)(d); and
e.have and maintain knowledge of the financial services covered by the licence: s 912A(1)(ea) (See Corporations Regulations 2001 … [RG] 7.6.01BA).
Adequate financial resources to provide financial services covered by the Limited AFSL: s 912A(1)(d)
ASIC submits that in respect of the obligation at s 912A(1)(d) of the Act to have adequate financial resources, RG 166 and RG 2 address how an applicant can demonstrate that they have sufficient financial resources to provide the financial services in respect of which an application is made: RG 2.211 (ASIC’s Opening Submissions, paragraphs 43-44). ASIC points out that the Applicant in this case has failed to provide information satisfying RG 2 and RG 166. The Tribunal agrees for the reasons set out above that the Applicant has failed to comply with the requirements of the Regulations in the provision of financial information, including financial information to establish adequate financial resources. The issues identified in [77] to [81] above relating to cash flow projections, most of which were either conceded at the hearing by the Applicant or not answered, are of particular concern.
Similarly, the failure of the Applicant to comply with the requirements for B5 Financial Resources information under RG 2.321 and the unsatisfactory answers provided by the Applicant and Professor Watson as to the Applicant’s failure to provide complying
B5 Financial Resources information (see [69] to [72] above) are of concern to the Tribunal.
In the end the Applicant has failed to provide sufficient information, either compliant in the Regulations or otherwise, to enable the Tribunal to be “reasonably comfortable” that he has adequate financial resources for the purposes of s 912A(1)(d) of the Act.
Efficient, honest and fair provision of financial services: s 912A(1)(a)
Similarly, the Applicant’s failure to provide information required by RG 166 and RG 2.321 and Professor Watson’s apparent dismissal of the requirements of those regulations as somehow not applying to the Applicant because he has been “a tax agent for years, and chartered accountant for years,” and “we thought these things were obvious, I don’t know – what’s he got to write down?” (Transcript page 33) is of concern to the Tribunal in assessing whether it can be reasonably comfortable that the Applicant will do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly for the purposes of s 912A(1)(a) of the Act: see Felden and Australian Securities and Investments Commission [2003] AATA 301 at [14] as cited by Senior Member Toohey in Clemente at [10]referred to at [89] above.
A contravention of the “efficiently, honestly and fairly” standard of that subsection does not require a contravention or breach of a separately existing legal duty or obligation, whether statutory, fiduciary, common law or otherwise. The statutory standard itself is the source of the obligation: Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 357 ALR 240 [2350] (ASIC v WBC).
As to the meaning of “efficiently, honestly and fairly”:
(a)The words “efficiently, honestly and fairly” must be read as a compendious indication meaning a person who goes about their duties efficiently having regard to the dictates of honesty and fairness, honestly having regard to the dictates of efficiency and fairness, and fairly having regard to the dictates of efficiency and honesty.
(b)The words “efficiently, honestly and fairly” connote a requirement of competence in providing advice and in complying with relevant statutory obligations. They also connote an element not just of even handedness in dealing with clients but a less readily defined concept of sound ethical values and judgment in matters relevant to a client’s affairs.
(c)The word “efficient” refers to a person who performs his duties efficiently, meaning the person is adequate in performance, produces the desired effect, is capable, competent and adequate. Inefficiency may be established by demonstrating that the performance of a licensee’s functions falls short of the reasonable standard of performance by a dealer that the public is entitled to expect.
(d)It is not necessary to establish dishonesty in the criminal sense. The word “honestly” may comprehend conduct which is not criminal but which is morally wrong in the commercial sense.
(e)The word “honestly” when used in conjunction with the word “fairly” tends to give the flavour of a person who not only is not dishonest, but also a person who is ethically sound.
ASIC v WBC at [2347]. See also Australian Securities and Investments Commission v Camelot Derivatives Pty Ltd (in liq) (2012) 88 ACSR 206; [2012] FCA 414 at [69]; Australian Securities and Investments Commission v Avestra Asset Management Limited (in liq) (2017) 348 ALR 525; [2017] FCA 497 at [191], and Australian Securities and Investments Commission v Cassimatis (No 8) (2016) 336 ALR 209; [2016] FCA 1023 at [674] per Edelman J.

The Tribunal agrees with ASIC’s assessment. The Tribunal is not satisfied that the Applicant has demonstrated that he holds the required knowledge in relation to SMSFs merely from having been appointed a representative of Merlea.
On the basis of the evidence before the Tribunal, the Tribunal is not satisfied that there is no reason to believe that the Applicant is likely to contravene the obligations of

s 912A(1)(ea) of the Act.
Compliance with conditions of licence and financial services laws: ss912A(1)(b) and (c)
ASIC submits (ASIC Closing Submissions, page 15, paragraph 92) that the Tribunal cannot be satisfied that the Applicant will comply with the conditions of the licence and with financial services laws when:
(a)the Applicant submitted with the Application a document titled “overview of business” which stated that the financial services and products to be provided included “portfolio review services”, “direct share trading facility” and “margin lending” (R2, T3, page 121);
(b)The Application was for a Limited AFSL (R2, T3, pages 92 and 93) – limited to providing financial product advice in relation to a range of financial products including SMSFs and a person’s existing holding in a superannuation product (R2, T3, page 93: A4.9.1); arranging for a person to deal in a SMSF (R2, T3, page 93: A4.9.2), arranging for a person to deal in a SMSF on behalf of another (R2, T3, page 93: A4.9.3) and providing “Class of Product” advice (R2, T3, page 93: A4.9.4) and the class of products that were listed in A4.9.4 in the Application;
(c)The Applicant did not seek an authorisation to provide advice about:
(i)specific financial products; or
(ii)class of product advice for classes outside what was listed in 4.9.4;
None of the above categories covers the provision of financial product advice about any of the following financial products listed by the Applicant in his A5 Business Description (R2, T3, page 121), namely “portfolio review services”, “debentures, stocks or bonds issued by government”, “direct share trading facility” and /or “margin lending”;
(d)The Applicant stated that he was informed by ASIC that he would not be able to provide these services under his limited licence (Transcript page 46); and
(e)To provide those financial services with a limited AFSL would be unlawful pursuant to s 911A(1) of the Act, constituting a failure to comply with a financial services laws as required by s 912A(1)(c) of the Act and an offence under s 911C of the Act.
In addition to the above matters ASIC also relies on the Applicant not having completed the relevant Advanced Diploma relating to SMSFs and the identified previous misrepresentations as to his holding various authorisations.
ASIC also relies on the fact (admitted by the Applicant at the hearing, Transcript page 115) that he disobeyed the law regarding when he was legally able to drive.
The Tribunal accepts that the matters identified by ASIC are relevant to a consideration of whether there is reason to believe that the Applicant would be likely to contravene the conditions of a limited AFSL if it were to be granted. While the Tribunal accepts that the Applicant has been a chartered accountant for many years and, as far as is known to the Tribunal, has not had any issues with regulators or professional bodies relating to his practice as an accountant, the circumstances surrounding the matters raised by ASIC and the context in which those events occurred does indicate either a lack of care, or understanding by the Applicant of the strict and technical nature of his obligations, or potentially, an attitude that the Act and the Regulations do not need to be strictly complied with. Accordingly, the Tribunal is not satisfied that there is no reason to believe that the Applicant will not comply with the conditions of an AFSL in the test as set out in the authorities referred to at [89] to [91] above.
Issue 3: The Tribunal cannot be satisfied that the Applicant is of good fame and character s 913B(1)(c) and s 913B(2)
The phrase “good fame and character” appears in several sections of the Act and in other legislation. The judicial and tribunal decisions dealing with that phrase have fundamentally applied the same basic considerations with appropriate recognition of the particular context in which the phrase is used.
A helpful explanation of the meaning of the relevant terms is set out in Deputy President McCabe’s decision in Williams and Australian Securities and Investments Commission [2018] AATA 2312 (Williams and ASIC) a case dealing with that phrase as it appears in
s 920A(1)(d) of the Act:
[43]…It is clear the sub-section requires that there be reason to believe the person was of good fame and good character. It is not enough that an individual has one and not the other. Moreover, it is clear the assessment of one’s fame and character must be made at the time of the hearing: see, for example, Prothonotary of the Supreme Court of New South Wales v Alcorn [2007] NSWCA 288 at [57] per Hoeben J; see also Shi v Migration Agents’ Registration Authority (2008) 248 ALR 390. The sub-section requires that I be satisfied there is reason to believe he is – as opposed to was – of good fame and character, after all. That means there is a possibility a compromised reputation might be repaired and defects in one’s character might be remedied in the interregnum between the hearing and earlier instances of bad behaviour that reflect on character or invite infamy: see, for example, Re Davis (1947) 75 CLR 409 at 416 per Latham CJ.
[44] I was referred to a number of cases in which the dual concept of good fame and character was discussed. The cases regard ‘fame’ as a reference to one’s reputation, while ‘character’ requires an examination of one’s moral qualities and nature: see, for example, Prothonotary of the Supreme Court of New South Wales v P [2003] NSWCA 320 at [17]. For my own part, I am not sure there is much profit in generating synonyms for plain English words. Words like ‘fame’ may be old-fashioned but their meaning is clear enough and attempts to further define them are apt to mislead...
Deputy President McCabe goes on (at [45]-[47]) to identify the elements of the test that emerge from the cases to which he had referred. They are:
(a)“the test of fame and character is to be applied with one eye to the purpose for which the test was created”. The test is as to the applicant’s fame and character insofar as it is relevant to the role of a person providing financial services;
(b)“[t]he statutory language focuses on whether there is reason to believe the applicant is not of good fame or character. That is not the same thing as asking whether the applicant is of good character, or – even less accurately – whether he is a paragon of virtue since the public does not expect perfection in financial advisers. It is not enough that one be satisfied the applicant engaged in bad behaviour. That bad behaviour must point logically to relevant defects in character. Even very bad behaviour might not go that far in the circumstances of a particular case. While actions speak louder than words when it comes to assessments of character, those actions might still suggest a serious lapse of judgment rather than a character defect”; and
(c)“evidence of dishonesty occurring in most contexts is problematic since a commitment (and reputation for commitment) to honest dealing is essential to this role. The centrality of honesty and trust is underlined by s 760A(b) of the Act which confirms one objective of the financial services law is to promote fairness, honesty and professionalism amongst providers of financial services.”
“Fame”, in the context in which it is used in this part of the Act, is a reference to the person’s public standing, his reputation amongst the broader community. There is no evidence that the Applicant is not of good standing in the community and the Tribunal does not understand that to be ASIC’s case.
The meaning of the expression “good character” was considered in Irving v Minister for Immigration, Local Government and Ethnic Affairs [1996] FCA 663; (1996) 139 ALR 84. Referring to the requirements in the Migration Act 1958 (Cth), Lee J said (at [94]):
Unless the terms of the Act and regulations require some other meaning be applied, the words ‘good character’ should be taken to be used in their ordinary sense, namely, a reference to the enduring moral qualities of a person, and not to the good standing, fame or repute of that person in the community. The former is an objective assessment apt to be proved as a fact, whilst the latter is a review of subjective public opinion... A person who has been convicted of a serious crime and thereafter held in contempt in the community, nonetheless may show that he or she has reformed and is of good character... Conversely, a person of good repute may be shown by objective assessment to be a person of bad character (Case citations omitted).
ASIC in its SFIC refers to McBride v Walton [1994] NSWCA 199 (McBride v Walton). That case identified a number of matters which should be considered when assessing whether a person is not of good character. They can be summarised as follows:
(a)whether the relevant conduct can be satisfactorily explained as an error of judgment rather than a defect of character;
(b)the intrinsic seriousness of the conduct qua fitness to practice;
(c)whether the conduct should be viewed as an isolated episode and hence atypical or uncharacteristic of the normal qualities of the person;
(d)the motivation which may have given rise to the conduct;
(e)the underlying qualities of character shown by previous and other conduct; and
(f)whether the person’s conduct post the proven episode of misconduct demonstrates that public and professional confidence may be reposed in him to uphold and observe the high standards of moral rectitude required of a medical practitioner.
As is evident from the above, the court in McBride v Walton was considering the issue of good character in the context of a medical practitioner, however, the principles identified are appropriate factors in considering whether a person is, or is not, of good character for the purposes of Chapter 7 of the Act.
Deputy President McCabe described the task of the Tribunal in Williams and ASIC (at [46]) as follows:
ASIC (and the Tribunal, when standing in ASIC’s shoes) must identify reasons that tend logically to the conclusion that the applicant is not of the good fame or character expected of a person licensed to provide financial services. It is not enough that I be satisfied the applicant engaged in bad behaviour. That bad behaviour must point logically to relevant defects in character. Even very bad behaviour might not go that far in the circumstances of a particular case. While actions speak louder than words when it comes to assessments of character, those actions might still suggest a serious lapse of judgment rather than a character defect.
ASIC submits (ASIC Closing Submissions paragraph 95) that the Tribunal cannot be satisfied that there is no reason to believe that the Applicant is not of good fame and character for three reasons. The first two reasons are:
96.First because of the false and in some respects unlawful representations made by the applicant and set out above in relation to efficient, honest and fair provision of financial services set out in paragraphs 78 to 91 above.
97.Second because of the false and misleading statements made by the applicant in his Application as set out at paragraph 90 above and in paragraphs 98 to 102 below.
The false and misleading statements referred to in the second reason are the Applicant’s representations that he was an authorised representative of Merlea and that he had, while in that role, provided a statement of advice to a client of Merlea. Under cross-examination, when confronted with a letter from Mr Nash of Merlea contradicting that statement, the Applicant conceded that that was not the case and that the only advice that he had given in that role was an advice to himself (Transcript page 82-83).
ASIC also points to the fact that the Applicant admitted in cross-examination that the only fees he earned were fees generated in providing financial advice to himself personally. No fees were generated by servicing clients (Transcript page 83). Despite this, he stated to ASIC in the Application (R2, T3, page 25) that “the fees outlined below were generated while I was acting as an Authorised Representative for Merlea”.
ASIC says that when confronted with document T3 in cross-examination the Applicant (ASIC’s Closing Submissions, page 16, paragraph 100):
a.said that he didn’t know what fees he was referring to: Transcript 88:38-39:3;
b.speculated about what fees he might be referring to: Transcript 88:43-44; 90:18;
c.said it was confusing, that parts of his application had been copied and pasted from his application to be an authorised representative of Merlea Investments: Transcript 89:26-34; and
d.said that he thought his father had written it and although he authorised it he hadn’t reviewed it properly; that he couldn’t make heads nor tails of it and that he couldn’t make sense of it: Transcript 90:34-37.
ASIC points out that under s 1308(8) of the Act, it is an offence of strict liability to make a false or misleading statement in an application for an AFSL (ASIC’s SFIC, paragraph 109).
The third reason that ASIC puts forward as a ground not to be satisfied that the Applicant is of good fame and character is that the Applicant has been shown to be a person who has demonstrated a willingness to break the law by driving a motor vehicle with a blood alcohol level above the legal limit when he knew that he was disqualified.
The Tribunal finds that while some of the Applicant’s conduct, his apparent lack of care for detail and accuracy of a number of his statements, including while giving evidence under oath, fall short of what could reasonably be expected of someone seeking to be engaged in the provision of financial services, that conduct does not point to an underlying character flaw sufficient to establish that the Applicant is not of good fame or character. The Tribunal therefore rejects ASIC’s argument that there is reason to believe that the Applicant is not of good fame or character.
CONCLUSION
The Tribunal finds that:
(a)Issue 1: the Application was not made in accordance with s 913A of the Act;
(b)Issue 2: it is not satisfied that there is no reason to believe that the Applicant is likely to contravene the obligations that will apply under s 912A if the AFSL is granted: s 913B(1)(b);
(c)Issue 3: there is no reason to believe that the Applicant is not of good fame and character: s 913B(1)(c) and s 913B(2).
DECISION
For the reasons set out above the decision under review is affirmed.

I certify that the preceding 154 (one hundred and fifty -four) paragraphs are a true copy of the reasons for the decision herein of Deputy President Boyle

.....[sgd]...................................................................
Associate
Dated: 21 December 2018

Date(s) of hearing: 23 and 24 July 2018

Applicant: In person

Representative for the Respondent: Mr N Goodstone

Counsel for the Respondent: Ms T Jonker

Date(s) of hearing:	23 and 24 July 2018
Applicant:	In person
Representative for the Respondent:	Mr N Goodstone
Counsel for the Respondent:	Ms T Jonker