Are people with criminal records allowed to own businesses in financial services?
Answer A Are you joking? There's $1.3 trillion tied up in superannuation that's supposed to be for people's retirement. There's no way you would let anyone with even the whiff of criminality anywhere near it. You would have to be bananas to think that someone with ill will wouldn't use their ownership to control the destiny of a financial services licensee.
Answer B Ahem, well, yes, people with criminal records are in fact allowed to own a financial services business which has a licence and (sound of throat clearing) they can exert whatever control they wish to inside the company. The test for a financial services licence relies on the directors of the financial services business passing a test of good fame and character. The same test is not applied to the owner of the license in fact there is little evidence ownership of the business is even considered.
Answer Sadly, B is correct.
How does a scoundrel financial planner find his or her way into the industry?
Answer A There are no scoundrels in this industry - they are carefully weeded out by the holders of financial services licences. These licensees have far too much skin in the game to put their own licence at risk. The vetting means that people (or whole businesses) that become "authorised representatives" of the licensed business behave in a thorough and ethical manner.
Answer B A scoundrel finds a financial planning group that doesn't pay too much attention to whom it is authorising. Some financial services businesses act as little more than licences-for-hire who are happy to clip the ticket, appointing practically anyone who knocks on the door as an authorised representative.
These businesses are shoddy enough and happy enough to take a punt that the people (or whole businesses) they authorise are behaving appropriately. The scoundrels (or scoundrels running whole businesses) then carry on with practically no other checks.
Answer Sadly, B is correct.
W hat is the corporate regulator doing about the issue of licences-for-hire in the financial planning industry?
Answer A A fair bit. The Australian Securities and Investments Commission is looking closely at the issue and checking just how some financial planning groups have managed to accumulate a whole range of odds-and-sods financial planners, without any real evidence the group is holding its authorised representatives to an appropriate professional standard.
Answer B Not enough. ASIC has allowed a system to develop so that unsavoury planners can hop from one network to another, with seeming impunity for both planners and the holders of the licence.
Answer Sadly, answer A and B are the correct answers.
Is my super safe?
Answer A Australia's superannuation system and the national savings they represent are the envy of the developed world, and are closely regulated by the Australian Prudential Regulation Authority.
Answer B There have been notable thefts that have shown weaknesses in the current superannuation system, including Trio Capital in 2009 (about $180 million missing) and Commercial Nominees in 2002 (about $25 million stolen).
Answer C A weakness in the current system is a lack of control over conflicts of interest in superannuation, so the financial planner, the trustee and the fund manager can all be owned by the same person. It's not a good look at the best of times, but especially not a good look when that owner is also a criminal (see question one).
Answer A, B and C are correct.
I f I lose all my super because someone robs me of my life savings, do I get compensation?
Answer A Of course.
Answer B Yes, after more than a year, if you are in a super fund regulated by the Australian Prudential Regulation Authority, and the fund has taken a big knock.
Answer C No, if you are in a self-managed super fund.
Answer D No, if you are in a super fund regulated by the Australian Prudential Regulation Authority and the fund has not taken a big knock.
Answer Sadly, answer A is not the correct answer. Answers B, C and D are the correct answers.
H ow long do you go to jail for if you steal money as a financial services provider?
Answer A Two years and six months for dishonestly helping to steal $26.6 million in super and making $1.3 million.
Answer B Three years for insider trading and making $1.9 million.
Answer C Two years for ripping off $4 million from your clients as a stockbroker.
Answer A (Shawn Richard in Trio Capital), B (fund manager John Joseph Hartman) and C (stockbroker Robert Blanshard) are all correct.
H ow do I make sure criminals keep their hands off my hard-earned super?
Answer Be careful. Go to brand names you trust. Find a financial planner who listens to your needs. As a general principle if it looks too good to be true, it usually is. Look at the interest on a term deposit (currently about 5.5 per cent a year). If anything is promising greater than that, you are taking more risk. If anything is promising greater than 10 per cent a year, it is quite risky. If it is promising greater than 20 per cent, either do it with money you can afford to lose or forget about it.
Frequently Asked Questions about this Article…
Can people with criminal records own financial services businesses or control a financial services licence?
Yes. The article explains that the good fame and character test for an Australian financial services licence (AFSL) is applied to the directors of the licensed business, not always to the ultimate owner. That means people with criminal records can own businesses that hold licences and potentially exert control inside the company.
What are 'licences‑for‑hire' and how do they let unscrupulous financial planners operate?
Licences‑for‑hire are licence holders that appoint authorised representatives with minimal vetting, essentially 'clipping the ticket' to earn fees. The article says some groups appoint almost anyone who knocks on the door, allowing unscrupulous planners to operate with little oversight under that licence.
Is the corporate regulator (ASIC) doing anything about licences‑for‑hire and rogue planners?
Yes and no. The article notes ASIC is looking closely at how some planning groups accumulate large numbers of advisers without evidence of proper professional standards, but it also says the system has allowed planners to hop between networks with seeming impunity, so weaknesses remain.
Is my superannuation safe under the current system?
Mostly yes — Australia’s superannuation system is regulated by APRA and is strong overall — but it has known weaknesses. The article cites past thefts (Trio Capital in 2009 with about $180 million missing and Commercial Nominees in 2002 with about $25 million stolen) and highlights conflicts of interest where the planner, trustee and fund manager can be owned by the same person.
If someone steals my super, will I get compensation?
It depends. The article says you may get compensation if you’re in an APRA‑regulated fund that has taken a big knock (and only after more than a year). You will not get compensation if you’re in a self‑managed super fund (SMSF), and you won’t be compensated if the APRA‑regulated fund hasn’t suffered a major loss.
What criminal penalties have financial services criminals faced?
The article gives real examples: Shawn Richard (Trio Capital) received two years and six months for dishonestly helping to steal $26.6 million in super and making $1.3 million; fund manager John Joseph Hartman got three years for insider trading that made $1.9 million; and stockbroker Robert Blanshard got two years for ripping off about $4 million from clients.
How can I protect my super from criminals and rogue advisers?
Be careful and stick with trusted brand names. Find a financial planner who listens to your needs and avoids high‑pressure sales. The article’s practical advice: if an investment promise looks too good to be true, it usually is — use familiar providers and advisers you trust.
How do I spot risky return promises and avoid dangerous investments for my super?
Compare promised returns to safe benchmarks: the article uses the term deposit rate (around 5.5% p.a. at the time) as a guide. Promises above 10% p.a. indicate significant risk; promises above 20% p.a. are very risky. If you see those kinds of claims, only invest money you can afford to lose or avoid the opportunity altogether.
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