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Firm Announcements and Law Updates

The Demise of Dover

In dramatic news within the financial services community, late on Friday 8 June 2018 we found out that Dover Financial Advisers would cease operation of their Australian financial services licence (AFSL).

Dover advised its network of over 400 advisers by email that they would be able to implement any advice if they had received the instructions prior to 8 June 2018 up to 6 July 2018. After 6 July 2018 the company would cease to operate their AFSL.

So far, the information we have at hand from Dover is that this decision was reached after an agreement with ASIC. Dover's statement also focuses on the heavy public scrutiny it received during the course of the Royal Commission hearings. 

Although we have heard very little from ASIC, they have provided a brief statement. This has said that ASIC served a notice on Dover that said it was minded to suspend or cancel Dover's AFSL. ASIC seem to indicate that the decision to cancel the AFSL was reached independently by Dover.

It may be the case that Dover jumped before it was pushed. At this stage, we don't know for certain. 

Whatever the circumstances, ASIC have clearly turned their sights on the financial services industry. Between 4 and 7 June 2018 ASIC issued seven media releases about action they had taken. Five of those media releases relate to action against financial advisers or licensees:

- 7 June 2018: ASIC suspends AFS licence of Vesta Living Communities

- 7 June 2018: ASIC permanently bans former NAB financial adviser

- 6 June 2018: AFS licensee fails to meet compliance and supervisory requirements

- 5 June 2018: ASIC cancels AFS licences of BBY Advisory and SmarTrader and further suspends AFS licence of BBY Ltd

- 5 June 2018: ASIC permanently bans Veronica Macpherson from providing financial services

If those in the financial services industry were not already on notice then they are now, ASIC is going to be increasingly active. 

The notion that ASIC had foreshadowed cancelling Dover's AFSL is a significant decision. Whether it ultimately would have cancelled the licence, or just imposed significant licence conditions and/or required an enforceable undertaking, we will never know. 

From experience, when an enforceable undertaking or licence conditions are imposed it significantly impacts the  business operations of a licensee. Perhaps Dover's directors thought it best surrender the licence immediately rather than devote significant resources to ongoing compliance issues and have their network of advisers gradually lave them. 

So, what is the take out here? First, make sure you invest heavily in compliance oversight to help identify any issues within an AFSL. Second, make sure you conduct a review of your compliance operations regularly to ensure they are up to standard. Third, be prepared for a more interventionist ASIC. They will be increasingly examining the operations of AFSLs. Most significantly sized AFSLs can expect some sort of examination by ASIC in the short to medium term. 

Dover may be the first significant licensee to cease operation, I suspect they won't be the last.

*Footnote: Unfortunately lost in all this is the clients of the Dover advisers. With so many advisers it is estimated that up to 30,000 clients could be effected. That leaves those clients in a difficult position when looking for financial advice in the lead up to the end of financial year.  

Liam Young