This is the announcement from ASIC in relation to the first finding of liability against a licensee for a breach of the FOFA reforms.

1. ASIC media releases are point­in­time statements. Please note the date of issue and use the internal search function on the site to
check for other media releases on the same or related matters.
Tuesday 4 April 2017
17­100MR Federal Court declares Melbourne licensee breached
FOFA laws
The Federal Court has found that Melbourne­based financial advice firm NSG Services Pty Ltd (formerly National Sterling Group Pty
Ltd) (NSG) breached the best interests obligations of the Corporations Act introduced under the Future of Financial Advice (FOFA)
reforms.
This is the first finding of liability against a licensee for a breach of the FOFA reforms.
This matter relates to financial advice provided by NSG advisers on eight specific occasions between July 2013 and August 2015.
On these occasions, clients were sold insurance and/or advised to rollover superannuation accounts that committed them to costly,
unsuitable, and unnecessary financial arrangements.
NSG consented to the making of declarations against it and after a hearing on 30 March 2017 the Court was satisfied that
declarations ought to be made.
The Court found that NSG’s representatives:
breached s 961B of the Corporations Act by failing to take reasonable steps to ensure that they provided advice that
complied with the best interests obligations; and
breached s 961G of the Corporations Act by failing to take reasonable steps to ensure that they provided advice that
was appropriate to its clients.
Those breaches amounted to a contravention by NSG of s 961L of the Corporations Act, which provides that a financial services
licensee must ensure its representatives are compliant with the above sections of the Act.
The Court made the declarations based on the following deficiencies in NSG's processes and procedures:
NSG’s new client advice process was insufficient to ensure that all necessary information was obtained from, and given
to, the client;
NSG’s training on legal and regulatory obligations was insufficient to ensure clients received advice which was in their
best interests;
NSG did not routinely monitor its representatives nor identify deficiencies in the knowledge or skills of individual
representatives;
NSG did not conduct regular or substantive performance reviews of its representatives;
NSG’s compliance policies were inadequate, and did not address its representatives’ legal or regulatory duties, and in
any event, were not followed or enforced by NSG;
there was an absence of regular internal audits, and the external audits conducted identified issues which were not
adequately addressed nor recommended changes implemented; and

2. NSG had a “commission only” remuneration model, which meant that representatives would only be compensated by
way of commission for sales of life insurance products and superannuation rollovers.
ASIC Deputy Chairman Peter Kell said, “This finding, the first of its kind, provides guidance to the industry about what is required of
licensees to ensure representatives comply with their obligations to act in the best interests of clients and provide advice that is
appropriate".
ASIC has sought orders that NSG pay pecuniary penalties in relation to the declarations made. A date for the hearing on penalty will
be fixed by the Court.
Background
On 3 June 2016, ASIC commenced proceedings against NSG in the Federal Court (refer: 16­187MR).