CSLR payment leads to ASIC canceling another AFSL

The Australian Securities and Investments Commission (ASIC) has revoked the Australian Financial Services License (AFS License) of DOD Bookkeeping Pty Ltd (in liquidation) following a payment by the Compensation Scheme of Last Resort (CSLR).

On March 29, 2024, the Australian Financial Complaints Authority (AFCA) entered a judgment against DOD, which DOD did not pay. Subsequently, on October 23, 2024, the CSLR paid $64,860.05 to an individual for the AFCA determination and notified ASIC.

As a result, the regulator revoked DOD’s AFS license on November 7, 2024.

Where the CSLR pays compensation to an eligible consumer in connection with an AFCA determination and notifies ASIC of the details of the company that has not paid the compensation, ASIC must revoke the company’s AFS license or credit license .

In 2015, the financial firm advised the complainants to set up a self-managed superannuation fund (SMSF) and then buy two properties, one within and one beyond retirement age, using mainly borrowed money. The properties purchased were recommended by the financial company or by a related real estate investment arm of the financial company, which operated under the same group of companies.

In its decision, AFCA found that without the inappropriate advice the complainants would not have purchased either property and would not have established an SMSF.

“The complainants lost $112,730.35 due to the SMSF but made $57,269.84 on the personal property. Overall, this is a net financial loss of $55,460.51. They also suffered a non-financial loss that warrants $3,000 in compensation,” AFCA said.

Cancellation is not subject to discretion or merits review.

ASIC said the decision is not the first regulatory action related to DOD. On May 17, 2021, ASIC commenced proceedings against DOD alleging a breach of the prohibition on conflicting remuneration, and failing to provide appropriate financial advice and to fulfill its best interest duty in relation to financial advice to selected clients. The case was heard on December 2 and 3, 2021. The ruling has been reserved.

This is also not the first time that an unpaid AFCA determination and subsequent CSLR payment has resulted in an AFSL being canceled, with the business regulator who took action against Libertas in August.

Libertas, which was acquired by Sequoia Financial Group in August 2019, declared bankruptcy in May 2023. In a statement at the time, Sequoia said it planned to consolidate the AFS licenses, with management making the decision to transfer Libertas’ operations and customers to InterPrac. Financial planning and Sequoia wealth management.

The former dealer group is now managed by an external company.

An AFCA decision against Libertas had previously been issued on July 24, 2023, but was not paid by the company. As a result, on July 24, 2024, the CSLR paid a non-specific compensation amount to the individual and notified ASIC, prompting the cancellation.

In October, ASIC also canceled the AFSL and the Australian Credit License (ACL). Ultiqa Lifestyle Promotions Limited on a CSLR payment basis.