Melbourne AFSL pays $9 million in fines

A Melbourne company has copped about $9 million in penalties after ASIC found it offered personal loans with the proviso customers implement financial advice from the firm.

Financial Circle offered personal loans to consumers of up to $5000. However, they could only be availed if the customer agreed to receive and act on financial advice from the firm. This advice typically recommended switching superannuation providers and insurance products, according to ASIC.

"When consumers implemented the advice, significant advice fees were paid to Financial Circle directly from the consumer's superannuation. Financial Circle also received ongoing commission payments from the insurers. This process often resulted in substantial erosion - in many cases up to 30% - of the client's superannuation balances," the regulator said in a statement.

Financial Circle holds an AFSL authorising it to advise and deal in life risk insurance and superannuation products. It is also holds an Australian credit licence authorising it to engage in credit activities other than as a credit provider.

The Federal Court has now ordered the AFSL to pay $8,980,000 in penalties on the back of contravening numerous financial services, credit and consumer protection laws.

The court has also permanently banned it from carrying on a financial services business and providing credit or entering into a credit contract as a credit provider.

On January 10, ASIC obtained a restraining order against the company, as it awaited trial.

In seeking the January restraining order against Financial Circle, ASIC called the Financial Circle case a "sequel" to Wealth Risk Management [injunction] proceedings of 2017. That case was settled in February this year with a $7.8 million fine from the Federal Court.

Court documents from January 10 show ASIC alleged that Financial Circle's AFSL was purchased by Joshua Fuoco and other individuals in August 2017, after his previous endeavours failed or were brought to a halt by the ASIC.

"ASIC contends that, after interlocutory injunctions were granted against the corporate defendants in the WRM Proceeding (the Fuoco Group), Joshua Fuoco and other individuals who had managed the Fuoco Group discussed at length the further development of the cash rebate scheme that was the subject of that proceeding," the regulator said in Jan 10 documents.

"ASIC alleges that, initially, Mr Fuoco and the other individuals created three new companies, referred to as the "A3 Group", and that the business model adopted by this group was substantially the same as the cash rebate scheme of the Fuoco Group, save that clients were offered loans instead of cash rebates. ASIC contends that the A3 Group ran into difficulties and, to overcome this, Financial Circle was purchased in or around August 2017."

Read more: ASICFinancial CircleA3 GroupFederal CourtMr FuocoWealth Risk Management
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