The corporate regulator believes the commission-based remuneration model around life insurance sales at NSG Services led to a culture that might have caused breaches of the best interests duty.
Sister publication ifa reported last year that ASIC took NSG Services Pty Ltd (formerly National Sterling Group Pty Ltd) to court for failing to take reasonable steps to ensure that its advisers complied with the best interests obligation when providing advice to clients.
Last week, it was announced that the Federal Court ruled in ASIC’s favour.
The regulator believes NSG’s remuneration model played a role in the breaches, an ASIC spokesperson told ifa.
The spokesperson also confirmed some clients lost money as a result.
“The commission-based salary structures created an incentive for representatives to emphasise sales imperatives over compliance requirements, and a culture in which the best interests and appropriate advice duties were more likely to be overlooked,” the spokesperson said.
“In some instances, the advice resulted in the client being double insured. Some advice resulted in the client’s superannuation being depleted. In many instances, the advice caused some financial loss to the client.
“In no instance was the client’s position improved.”
ASIC could not confirm whether NSG will offer compensation, as this was not sought as part of the relief in its proceedings.
The Federal Court’s finding is the first of its kind, the regulator said in a statement.
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.
NSG was taken to court over 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 roll over superannuation accounts that committed them to costly, unsuitable and unnecessary financial arrangements.
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.