ASIC cancels licence of Brite Advisors

ASIC has cancelled the Australian financial services licence of Brite Advisors after the now-defunct investment and pension firm failed to compensate a client, triggering a payout under the Compensation Scheme of Last Resort (CSLR).

The regulator cancelled Brite Advisors' licence on April 29, after the CSLR paid $21,888 to a client who'd won a complaint through the Australian Financial Complaints Authority (AFCA).

The firm hadn't complied with AFCA's determination, issued in September last year.

Brite's local licence cancellation comes as its wider operations unravel across several jurisdictions.

The company's Australian entity was placed into court-ordered liquidation in February last year after ASIC investigations found a significant shortfall in client assets.

Court-appointed receivers later identified an estimated US$11.2 million hole in client portfolios, which had been pooled under a custodial structure with inadequate asset segregation.

The receivers are currently seeking court approval for a methodology to distribute the funds back to investors, though distributions aren't expected until later this year.

The company also operated through related entities in the US, UK, and Hong Kong, all of which are now subject to regulatory action or insolvency.

In the US, the Securities and Exchange Commission charged Brite Advisors USA with custody rule breaches and fiduciary failures for directing client assets into accounts controlled by its Australian affiliate, which allegedly used them as collateral to fund the business.

In the UK, Brite's advisory arm was wound up in July last year after the Financial Conduct Authority imposed trading restrictions. Its associated pension provider, PSG SIPP, was later placed into administration, with its client accounts sold to a new provider.

While Brite Advisors' licence is now cancelled, ASIC has required that Brite Advisors remain a member of AFCA for another year. This allows clients to continue using the complaints process.

Under the legislation passed alongside the CSLR's creation, ASIC is obliged to cancel the financial services or credit licence of any firm that fails to pay AFCA-determined compensation later covered by the scheme. The cancellation is automatic and can't be appealed.

Brite Advisors is one of several failed advice and investment firms to lose their licences under this mechanism. ASIC has previously cancelled six other AFS licences and four credit licences after CSLR payments were made.

The CSLR, which began processing claims in April last year, can compensation eligible consumers up to $150,000 if a financial firm fails to comply with an AFCA ruling.