AAT upholds ban on former director of credit business

This comes after the Administrative Appeals Tribunal (AAT) upheld ASIC’s decision to prohibit Mr Wynd from performing any function involved in the provision of credit, other than as an employee of an APRA-regulated ADI — assisting borrowers obtain loans “independently of any financial services”. 

ASIC had claimed that a permanent ban was appropriate given Mr Wynd’s connection to misconduct by Financial Circle, which incurred a penalty exceeding $8.9 million, handed down by the Federal Court in October 2018.  

In its decision, the AAT concluded that Financial Circle’s activities constituted “egregious breaches” of minimum standards required by both the financial services and credit legislation. 

The AAT judged that such activities “exploited vulnerable consumers”, making Mr Wynd’s involvement and “lack of insight” into the misconduct “troubling”.

However, the AAT acknowledged that Mr Wynd was “not the architect of the offending business model”, and thus determined that he should be allowed to be employed by an APRA-authorised ADI.

The AAT had previously made orders prohibiting ASIC from publishing its decision to permanently ban Mr Wynd until further order of the AAT, which expired on 2 October 2020, following expiry of the appeal period.

Background

Financial Circle was found to have offered personal loans to consumers of up to $5,000 that could only be obtained if the consumer agreed to receive and implement financial advice, which typically recommended purchasing personal insurance products and switching superannuation providers. 

After implementing the advice, “significant advice fees” were found to have been paid to Financial Circle directly from the consumer’s superannuation. Financial Circle also received ongoing commission payments from the insurers, with the process resulting in a “substantial erosion” of up to 30 per cent of the client’s superannuation balances.

The court found that, in conducting this business, Financial Circle:

• made false and misleading representations and engaged in misleading and deceptive conduct;
• engaged in unconscionable conduct; and
• breached its licensee obligations under its Australian Financial Services Licence.

The Federal Court also ordered that it be permanently restrained from:

• carrying on a financial services business; and
• providing credit or entering into a credit contract as a credit provider.

The company was also ordered to pay ASIC’s costs.

[Related: ASIC takes short-term lenders to court]