Federal Court hammers defunct advice firm with $11m penalty

Defunct advice firm Equiti Financial Services, since renamed DOD Bookkeeping, which has been placed into liquidation, has been slammed with an $11.03 million penalty for providing "cookie cutter" advice and breaching conflicted remuneration laws.

Equiti Financial Services paid $130,250 in bonuses to three financial advisers who provided template advice to clients to roll over their superannuation into self-managed super funds (SMSFs) and use those funds to purchase property through a related entity, Equiti Property.

The Federal Court found that advice to 12 clients was "cookie cutter" and failed to consider their individual circumstances or objectives. It also determined that the bonuses paid to the advisers, when clients settled on property offered through Equiti Property, distorted the advice they provided and breached conflicted remuneration laws.

In settling the penalty, the Court said the misconduct was "plainly deliberate" and "extended over several years." It noted that the recipients of the advice were making important and potentially life-changing decisions about their superannuation.

Separately, it found the advice was given in an incentivised environment that rewarded uniform advice, benefiting the advisers to the detriment of their clients.

Justice Goodman also observed that the asset allocations in Statements of Advice were "strikingly different" from what was suggested, excessively weighted toward real property.

ASIC deputy chair Sarah Court said misconduct exploiting superannuation savings is an enforcement priority.

ASIC updated its guidance on conflicted and banned remuneration (RG 246) in December 2020, and released an information sheet in December 2022 to help advice providers comply with their legal obligations when advising on SMSFs.

"In this case the Court found bonuses paid to advisers influenced the advice they provided, resulting in poor financial outcomes for the consumers involved," Court said.

"Financial services licensees who employ advisers to provide personal financial advice need to ensure that they place their clients at the forefront.

"The size of today's penalty demonstrates the seriousness of this misconduct."

ASIC cancelled Equiti Financial Service's Australian financial services licence in November last year.