Financial Services Provider Penalised $11 Million Over Poor Advice and Conflicted Remuneration

The Federal Court has ordered DOD Bookkeeping Pty Ltd (formerly known as Equiti Financial Services Pty Ltd) to pay $11,030,000 in penalties after findings of serious misconduct involving conflicted remuneration and the provision of unsuitable financial advice.

Background

Between 2016 and 2019, Equiti Financial Services Pty Ltd (Equiti FS) advisers systematically recommended clients establish self-managed superannuation funds (SMSFs), and purchased properties associated with the business itself. The advice offered was largely generic and failed to properly consider the individual objectives, financial situation, or needs of the clients, breaching core financial advice obligations.

Conflicted Remuneration and Bonus Schemes

The court found that Equiti FS advisers were awarded bonuses totalling $130,250 for each successful property transaction completed by their clients. These bonuses constituted “conflicted remuneration,” as they created an incentive to recommend strategies that benefited the business financially rather than serving the clients’ best interests.

The Federal Court emphasised that conflicted remuneration practices undermine consumer trust and directly conflict with legal obligations designed to ensure clients receive quality, unbiased advice.

Deliberate and Ongoing Misconduct

Justice Bromwich described the misconduct as “deliberate and repeated,” noting it occurred over several years and involved systemic failings across the business. The judgment highlights that clients’ retirement savings were put at significant risk due to inappropriate recommendations made for the financial benefit of Equiti FS and its related entities.

Licence Cancellation

As a consequence of these breaches, ASIC cancelled Equiti FS’s Australian Financial Services (AFS) licence in November 2024. This cancellation followed a separate regulatory review into the company’s advice practices.

Importance of Regulatory Action

This case reinforces the importance of maintaining high standards in the financial advice industry, particularly around conflicted remuneration and client-centric advice. Financial services providers are reminded that prioritising commercial interests over client welfare can result in significant penalties and licence loss.