ASIC has banned NSW-based adviser Christopher Edward Luff from providing financial services for five years and has cancelled the AFS licence of his business, Build Your Wealth Pty Ltd (Build Your Wealth).
Mr Luff was referred to an ASIC Delegate in relation to concerns about financial product advice he provided, his management of conflicts of interest, and for his involvement in a self-managed superannuation investment structure where clients subsequently invested in the Storehouse Residential Trust ARSN 135 812 074 (Storehouse Trust).
ASIC’s review of a sample of Mr Luff’s advice files identified that Mr Luff did not act in the best interest of the clients and that the advice was not appropriate, given Mr Luff:
- limited the scope of the advice, and
- failed to make reasonable enquiries into the client’s relevant financial situation, objectives, needs and goals – therefore failing to base the advice on those circumstances.
ASIC established that there was a conflict between the interests of Mr Luff and those of his clients, due to the relationships between Build Your Wealth, the investment manager of the Storehouse Trust, Storehouse Pty Ltd (which was also an authorised representative of Build Your Wealth), and associated entities.
ASIC found that Mr Luff failed to prioritise the interests of his clients when he recommended that his clients enter into an ongoing service program without assessing if the clients required the service or could afford the service.
ASIC also found that Mr Luff failed to enquire of his clients as to why they wanted to invest in the Storehouse Trust and that the clients should have been made aware of:
- The risks of investing in the Storehouse Trust;
- The potential risk of losing all their funds with such an investment;
- The risk to the security of their living arrangement; and
- The risks if the Trust did fail.
The law requires financial advisers to give priority to their client’s interests when giving advice and to provide advice that is appropriate to the client. In circumstances where ASIC has found that Mr Luff’s advice to clients in relation to the Storehouse Trust was not appropriate or fit for purpose and that there were conflicts of interest of which clients were not informed. Investors with concerns in relation to their investment may wish to seek advice from a .
ASIC further determined that Build your Wealth failed to ensure that the financial services it provided were done so efficiently, honestly and fairly and that it failed to take reasonable steps to ensure its representatives complied with financial services laws.
The banning and cancellation order took effect from 9 April 2024. Mr Luff and Build your Wealth Pty Ltd applied to the Administrative Appeals Tribunal (AAT) seeking a confidentiality order, a review and a stay of ASIC’s decision. The AAT granted an interim stay which was in effect from 30 April 2024 to 24 July 2024. The AAT refused the substantive stay application and confidentiality orders on 17 July 2024. No hearing date has been set for the substantive review of ASIC’s decision.
The banning has been recorded on ASIC’s publicly available and the . ASIC’s Moneysmart website has useful information for consumers whose advisers have been banned.
Background
Storehouse Trust
ASIC made an interim stop order on the Storehouse Trust due to deficiencies in the target market determination on 1 September 2023. Following the interim stop order, the responsible entity of the fund, K2 Asset Management Ltd (K2), made amendments to the TMD that addressed ASIC’s concerns. The new TMD better defined the target market for the Fund around investor risk tolerance, investment objectives, investors need to withdraw money and the investment timeframe was amended. K2 also updated the distribution conditions in the TMD. As a result, on 15 September 2023, ASIC revoked the interim stop order and no final stop order was made.
