ASIC argues for $6m fine for IOOF unit RI Advice for giving defective financial advice

The corporate regulator says that an IOOF subsidiary should be fined for giving defective advice. That’s on top of the $6.5m in remediation it had already agreed to pay.

IOOF Chief Executive Renato Mota in Melbourne. Picture Stuart McEvoy/The Australian.

Lawyers acting for the corporate regulator have argued that an IOOF subsidiary that handed out defective financial advice should be handed a $6m fine – in addition to the $6.5m in remediation it had already agreed to pay – because it “facilitated” the alleged misconduct.

Appearing at a Federal Court hearing on Wednesday, Glyn Ayres, for the Australian Securities and Investments Commission, said RI Advice employee John Doyle’s faulty advice had been “facilitated by and made in the context of important failures” in the company’s supervision.

While RI Advice had agreed to compensate affected clients, Mr Ayres argued some may still be entitled to a payout because the company had only reimbursed 412 out of 877 clients who may have received Mr Doyle’s defective advice.

RI Advice, which was owned by the Australia and New Zealand Banking Group before IOOF Holdings acquired it in 2017, had failed to audit Mr Doyle’s files for nearly two years after he started his practice at the firm with $80m under management, Mr Ayres said.

PricewaterhouseCoopers had audited IOOF’s processes concerning RI Advice and “picked up problems” concerning the alleged wrongdoing but RI Advice failed to fix the issues, said Mr Ayres.

Mr Doyle’s alleged wrongdoing was “particularly egregious” because he convinced clients to invest in products where he knew the returns were “entirely speculative”, said Caroline Kenny for ASIC.

But Charles Parkinson for RI Advice argued a $6m fine was not “appropriate” because the business only made mistakes supervising the work of one employee.

Justice Mark Moshinsky questioned ASIC’s argument that RI Advice had not finished compensating affected clients, saying its total remediation of $6.5m seemed like “quite a lot of money”.

The penalty hearing comes after Justice Moshinsky found in August that RI Advice was liable for Mr Doyle’s alleged misconduct because it failed to ensure he provided appropriate advice, acted in clients’ best interests and put their interests above his own. The judge said RI Advice could not identify where advisers were avoiding advice quality checks or recommending non-approved financial products.

ASIC launched its case against RI Advice and Mr Doyle in October 2019, alleging the adviser gave “cookie cutter” advice to retail clients to invest in complex financial products without considering their goals or risk tolerance.

The case first came to light during the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry in 2017, which looked at Mr Doyle’s alleged wrongdoing as a case study on “bad advice”.

Mr Doyle worked as a financial adviser at RI Advice from May 2013 to June 2016 when the business was still owned by ANZ.

RI Advice has declined to comment.