Chapter 17 – ASIC’s in-house solicitors set Dover and Terry up at the Royal Commission

Who were the senior ASIC employee solicitors?

The ASIC employee solicitors were James McAllister-Harris and Inakshi Rajadurai[1]. Their supervisors were Andrew Thomas[2] and Georgina Thomas. Let’s call them the ASIC 4.

The team on the ground dealing day to day with Dover comprised James and Inakshi.

The two Thomas’ pulled the strings and told James and Inakshi what to do. The ASIC 4 worked as a tight group in ASIC’s Financial Services Enforcement, or FSE Unit. This unit handles high end surveillance investigations and litigation against financial planners and AFSLs.

Each of the ASIC 4 was very familiar with the content of and background to the three critical ASIC documents (the three ASIC documents) attached as appendices. Indeed it seems they were involved in their creation. These are:

  1. Financial Advice (FA) Unit’s Dover Discussion Paper dated 12 December 2016
  2. Stakeholder Referral to Financial Services Enforcement dated 29 March 2017 and
  3. Dover Financial Advisers Pty Ltd (‘Dover”) Memo to Ops” dated 31 March 2017.

Who were their ASIC 4’s FSE senior managers?

The ASIC 4 were managed by Tim Mullaly, the Executive Director of ASIC’s Financial Services Enforcement unit[3] (pictured opposite), and Glenn Childs, an (acting) senior manager in ASIC’s Financial Services Enforcement unit.

We contrast Tim Mullaly’s conduct towards each of the AMP and the banks, where the phrase “soft touch” is an overstatement, with ASIC’s attitude to Dover. This contrast highlights ASIC’s malice.

Obviously Mullaly and Childs are jointly responsible for the ASIC 4’s conduct within ASIC.

But outside of ASIC the ASIC 4 answer to the Victorian Legal Services Board.

The ASIC 4 and their malicious conduct

As you can read, the three ASIC documents set out ASIC’s serious concerns that Terry and Dover were involved in illegal egregious conduct. This conduct was sufficient to justify the closure of Dover and significant Corporations Act penalties against each of Terry and Dover. This included possible gaol for Terry (the alleged egregious conduct[4]).

Obviously Dover and Terry were not involved in such conduct. ASIC just made some terrible “mistakes”[5]. The details of the alleged egregious conduct in the three ASIC documents are largely redacted, so its extent and exact composition is not certain. Dover tried to find out using the FOI protocols but ASIC’s FSE team successfully blocked most requests (and tried hard to block the few successful ones).

The three ASIC documents reveal ASIC wanted to apply to the Federal Court for urgent injunctions under section 1101B and section 1324 of the Corporations Act. Terry was the target. It appears the ASIC 4 were deep in these processes. These injunctions are rarely sought, particularly against individuals[6]. They are only used in extreme cases where it is expected the relevant person is likely to commit further serious breaches of the financial services law.

The purpose of the proposed injunctions was to shut Dover down and to prevent expected further breaches of the financial services law by Terry. The ASIC 4 were well aware of ASIC’s concerns about the alleged egregious conduct. Indeed, the ASIC 4 were responsible for investigating and stopping (or is it otherwise managing?) that conduct.

The ASIC 4 are subject to the behaviour standards expected of solicitors

Solicitors, including solicitors employed in government, are subject to rules governing their behaviour (the VLSB rules). The rules have been developed by the courts, the parliaments and the professional bodies over centuries. They enhance and support the administration of justice. In Victoria and NSW most of these rules are set out in the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015[7]. Others derive from the common law.

First and foremost a solicitor’s duty is to the court. The administration of justice is paramount[8] and prevails to the extent of any inconsistency (rule 3.1). This paramount rule gives rise to many lesser rules. These include the obligation to be honest (4.1.2), to avoid any compromise to integrity or professional independence (4.1.4) and to not engage in conduct which prejudices or diminishes public confidence in the administration of justice or otherwise brings the legal profession into dispute (5.1).

In general terms these rules require the ASIC 4 to act with propriety and probity. They are officers of the Supreme Court. They must conduct themselves as such at all times. Their duty to the court as solicitors overrides their duty to ASIC as employees. So, for example, if ASIC expects the ASIC 4 to engage in misleading and deceptive conduct in the course of their ASIC employment, which ASIC apparently did, it is no excuse for the ASIC 4 to say ASIC required or expected it. As Mason CJ observed in Giannarelli duty to a client (or an employer) and the duty to a court are not just in competition. They are on a collision course.

They demand lawyers including the ASIC 4:

 “act in a variety of ways to the possible disadvantage of his client (or employer) … the duty to the court is paramount even if the client (employer) gives instructions to the contrary”[9].

The ASIC 4 are subject to the behaviour standards expected of public officers

The ASIC 4 are also subject to standards of behaviour generally expected of public officers.

One is reminded of the standard of behaviour expected of ASIC’s FSE unit under the Australian government’s model litigant obligations. Eugene Wheelahan writes well in his article Model Litigant Obligations: What are They and How are They Enforced.  (An extract is shown opposite.)

How did each of the ASIC 4 breach the VLSB rules?

In summary, the ASIC 4 knew ASIC was concerned about the Client Protection Policy. Throughout 2016 and 2017 the ASIC 4 deliberately misled and deceived Dover by not telling them and omitting the CPP from a list of ASIC concerns.

This is a culpable breach of the VLSB rules by each of the ASIC 4.

We deal with the related questions of “how do we know the ASIC 4 knew ASIC was concerned about the egregious conduct in 2016 and 2017?” before we expand on the “what did each of the ASIC 4 do that breached the VLSB rules?” in the following paragraphs.

How do we know the ASIC 4 knew ASIC was concerned about the egregious conduct?

The ASIC 4 knew ASIC was concerned the Client Protection Policy (CPP) was deceptive. This is because Paragraph 30 of the first paper[10] says:

It’s hard to get a clearer statement from ASIC than this. Even if one has to delete nearly half the words to get to what ASIC’S FA unit was trying to say[11]:

“A number of disclosures … appear … designed to unreasonably mislead or deceive clients.”

ASIC wanted to shut Dover down from 2016 on

The ASIC concerns were serious: the Stakeholder Referral to Financial Services Enforcement document[12] dated 29 March 2017 includes this passage[13]:

This means Peter Kell ordered ASIC to shut Dover down

Peter Kell engaged to note “a preference to consider alternatives to administrative action against the Licensee (ie Dover)”. This meant ASIC had to shut Dover down, ie cancel its licence in court using injunctions, (or whatever) as detailed below.

This theme of closing Dover permeates the three ASIC documents:

  1. ASIC writes at paragraph 1.2 of the Stakeholder Referral to FSE Paper:

“Alleged misconduct in relation to Dover is attributed primarily to McMaster. He is the sole director and key person and oversees all aspects of the licensee’s compliance framework. McMaster is involved in all operational aspects of Dover and appears to make all decisions.”

  1. ASIC continues at paragraph 3.3 of the Stakeholder Referral to FSE Paper:

“Given the nature of the findings by FA[14], FA sought early engagement with FSE[15] to assist in the development of a strategy to progress ASIC’s work on this licensee. Joint meetings were conducted between FA and FSE over the December/January period. The purpose of these meetings was to discuss the potential options going forward in relation to the AFS Licence. Specifically, FA was interested in exploring alternative approaches to a negotiated outcome (which has been unsuccessful with this licensee in the past and does not appear to be an effective regulatory outcome given the findings) and an administrative outcome which has also proved to have challenges and limitations in similar licensee matters in the past.”

  1. ASIC expands further at paragraph 5 of the Stakeholder Referral to FSE Paper and refers to injunctions against each of Terry and Dover to close Dover:

Dover requests an ASIC surveillance audit

Dover had no idea any of this was happening. ASIC did not say a thing about its concerns even on the one occasion when ASIC deigned to meet with Terry to discuss his concerns. On 22 April 2016 Terry met with Louise Macaulay, ASIC’s senior executive leader for financial advice, and asked her to audit Dover. Terry’s request came during a meeting where Louise demonstrated she did not understand Dover’s processes for reviewing SOAs. Terry did this because he wanted to prove to Louise and ASIC that Dover had sound compliance processes[16].

Dover’s previous requests for ASIC compliance audits

It’s fair to say Dover was unusual in requesting a compliance audit. We have never heard of any other AFSL doing this.

But it was not an unusual request for Dover. Dover welcomed ASIC review and saw it as a way of confirming its compliance processes were in order.

Dover had form requesting ASIC audits. For example, in October 2014 Dover  wrote to ASIC asking to be included in an ASIC compliance survey.

Dover’s email is reproduced here:

 The Dover 2016/2017 ASIC audit

ASIC accepted Dover’s request for a surveillance audit. It started in May 2016[17].  Dover was cooperative. Dover immediately provided all requested documents and explanations. Dover also volunteered privileged legal documents, such as a 2017 compliance report by NSW AFSL compliance lawyers Sophie Grace and Victorian compliance lawyers Holley Nethercote[18]. Dover did this to help ASIC understand its compliance processes.

During the first 12 months of the surveillance audit Dover repeatedly requested meetings and feedback from ASIC. ASIC repeatedly refused these requests.

You can read Adrian’s request here:

ASIC said it was not able to meet or provide feedback until the surveillance audit was completed. Dover believed ASIC. This is ASIC’s Andrew Davison’s response to Adrian’s request of 22 November 2016:

“Dear Adrian

Thank you for your e-mail. As you are aware from our recent notice, ASIC’s surveillance and review of documents is on-going. We are unable to provide any feedback until completion of the surveillance. (emphasis added)

Regards

Andrew Davison”

Two sets of rules: why did ASIC always treat Dover differently?

Dover now knows Andrew Davison, who worked with the ASIC 4 on these matters, was not correct. ASIC provided intra-surveillance feedback to the bank-owned AFSLs all the time.

When AMP’s Brian Salter e-mailed Louise Macaulay, Tim Mullaly and Peter Kell at 3.52 PM on 18 October 2017 asking if he and AMP’s Jack Regan could meet “at the earliest opportunity” Tim stayed up late to dutifully respond at nearly 10.00pm “… we would be happy to meet and would look also to up-date you on our work…”.

Tim went the extra mile to give AMP an up-date on ASIC’s investigations. Tim went that mile despite what the Royal Commission identified as probable criminal behaviour on the part of AMP. This included each of Brian Salter and Jack Regan.

The AMP team at the urgently convened AMP/ASIC meeting allegedly falsified the documents they gave Tim at that meetings. Yet Dover could not get a phone call returned.

It’s pretty obvious the ASIC 4 wanted to damage Dover. ASIC did not want to damage AMP. Yet Dover was 100% cooperative and genuine in its dealings with ASIC and AMP was definitely not: it probably committed crimes in its desperate efforts to mislead ASIC.

It does not make sense does it? Why did ASIC treat Dover so differently?

Dover specifically requests information from the ASIC 4 and the ASIC 4 respond in a deliberately misleading and deceptive way in breach of numerous ethical rules

On 1 June 2017 Terry emailed James McAllister-Harris and Inakshi Rajadurai as follows:

I hope you are well and that all is well. We are preparing the information you have requested and, and this should be available under your requested time frame.

We confess to concern about the strong overlap and repetition with the information already provided to ASIC over the last 12 months and in previous years going back as far as 2012. We are also concerned about your statement that you are investigating possible breaches of section 912A and the best interests duty and related provisions.

Can you please let us know in what respects you believe we have breached section 912A and which statements of advice you believe were not in the client’s best interest. Being specific here means we can greatly speed up the review process and I undertake to provide the specific information plus any extra relevant explanations to you as soon as possible. We also want to mitigate any damages that may be occurring if your concerns are valid. 

Could you please fill us in on the progress of the surveillance audit and ASIC’s thoughts/findings to date? We had hoped for some feedback by now and are obviously keen to see if there is any way we can do things better. We formally requested an interim report/feedback in about November 2016, but none was provided.

Further, I feel a meeting is a good idea. Are you able to come out to our office to discuss the matter? I would like to take the opportunity to walk you through our processes so you can see for yourself how we review statements of advice, and to also answer any questions you may have about our processes and how we ensure we comply with the law.

I think a meeting like this will add greatly to your understanding. Please feel free to ring me on my mobile 0417 451 961. Unfortunately, I am in meetings this afternoon. But I am available at 9.00 am tomorrow afternoon[19].

Kind regards

Later that day Terry emailed James again, following up with:

You will note from Terry’s two 1 June 2017 emails:

  1. Dover was concerned about mitigating any damages caused to clients by any inadvertent compliance errors and
  2. Dover undertook to rectify any concerns ASIC had even before ASIC advised Dover what those concerns were.

It’s hard to see how Dover could have acted with more good faith. Dover requested the audit, Dover cooperated fully, even volunteering legally privileged documents to ASIC[20]. Dover repeatedly requested meetings and feedback. Dover was concerned about clients and even undertook to rectify any compliance concerns and mitigate any damages before ASIC advised Dover what they were.

The ASIC 4’s intentionally misleading and deceptive response

James McAllister-Harris and Inakshi Rajadurai responded on Tuesday 6 June 2017. They did not mention the Client Protection Policy. Nor Peter Kell’s engagement to note ASIC should shut Dover down. Instead James said the suspected contraventions “were around”:

  1. the appointment and on-going monitoring of representatives
  2. the quality of advice provided by representatives
  3. the steps taken by Dover to remediate any representative misconduct.

James added: “These concerns may change during the course of ASIC’s investigations.”

Their email is reproduced here:

Looking back the ASIC 4 were being deliberately incomplete, misleading and deceptive. The ASIC 4 omitted all the big things and only mentioned the little things. Its not an accident. It was part of ASIC’s “let’ set Dover up at the Royal Commission “strategy.

A relevant aside: lets compare ASIC and AMP to ASIC and Dover once again

James and Inakshi again say ASIC cannot meet Dover because “they are not in a position to substantively discuss the matter at this stage”. This is not true. They were in a position to discuss things. They chose not to. This contrasts to the red-carpet their boss Tim Mullaly gave AMP’s senior executives. Tim could not get to meetings with them quicker.

May be Terry should have dropped a few names? Like Catherine, Greg, or Peter?

The two sets of rules phenomena[21] is real. Comparing ASIC’s soft touch with AMP to ASIC’s ruthless behaviour towards Dover highlights ASIC’s malice.

The ASIC 4 mislead Dover

We stress the ASIC 4 wrote the suspected Dover contraventions “were around”:

  1. the appointment and on-going monitoring of representatives
  2. the quality of advice provided by representatives
  3. the steps taken by Dover to remediate any representative misconduct.

The context of the email suggests these are the only concerns held by ASIC. This is because:

  1. the qualification “these concerns may change during the course of ASIC’s investigations” implies it was a complete list at 6 June 2017. But we now know ASIC believed the CPP was deceptive in 2016
  2. the absence of a phrase such as “these concerns include…” implies there are no other concerns as well and the list is finite and complete at 6 June 2017 and
  3. the absence of a sentence such as “there are other serious concerns that we are not yet prepared to provide any details of…” or similar qualification. 

The ASIC email does not mention Dover’s Client Protection Policy or that ASIC wanted Federal Court injunctions against Dover. The three ASIC documents show these were ASIC’s real concerns at this time. The ASIC 4 chose to not advise Dover of ASIC’s real concerns.

The ASIC 4 misled Dover in at least three ways. These are detailed in the following paragraphs.

1        The first misleading and deceptive statement or omission: no mention of the CPP

The ASIC 4 misled Dover by not advising Dover ASIC was concerned the Client Protection Policy was misleading, as stated by ASIC at paragraph 30 of its “Dover Discussion Paper” dated 12 December 2016, as reproduced above.  This seems a deliberate omission by the ASIC 4.  This is a breach of the VLSB rules.

2        The second misleading and deceptive statement: no mention Peter Kell had “noted his preference” ASIC shut Dover down in court using injunctions

The ASIC 4 misled Dover by not advising ASIC wanted to shut Dover down since 2016.

ASIC continues at paragraph 3.3:

 “Given the nature of the findings by FA[22], FA sought early engagement with FSE[23] to assist in the development of a strategy to progress ASIC’s work on this licensee. Joint meetings were conducted between FA and FSE over the December/January period. The purpose of these meetings was to discuss the potential options going forward in relation to the AFS Licence. Specifically, FA was interested in exploring alternative approaches to a negotiated outcome (which has been unsuccessful with this licensee in the past and does not appear to be an effective regulatory outcome given the findings) and an administrative outcome[24] which has also proved to have challenges and limitations in similar licensee matters in the past.”

ASIC expands further at paragraph 5:

It says: “following engagements with FSE we would seek to consider action against McMaster under section 1101B”. The writer is referring to the ASIC 4. The ASIC 4 were the FSE staff engaged in December 2016 and January 2017. The ASIC 4 were in the middle of it.

Obviously the ASIC 4 knew of Peter Kell’s engagement on this matter. They knew his awkwardly worded note meant an outcome other than a negotiated outcome or an administrative outcome was needed. They knew it was a direction to ASIC’s staff to close Dover down using fair means or foul. The ASIC 4 chose foul. They chose to deliberately mislead Dover.  This is a serious breach of the VLSB rules.

3        The third intentional misleading and deceptive statement or omission: no mention ASIC believed Dover and Terry were engaged in alleged egregious conduct

The ASIC 4 misled Dover by not advising Dover ASIC was concerned that it was engaged in other egregious schemes. These included the schemes outlined in “Example 3-Advice of Terry McMaster” and “Example 4-Advice of Florence Tee above.

The point is ASIC believed it was. And the ASIC 4 misled and deceived Dover by not telling Dover of these concerns. This is a serious breach of the VLSB rules.

Why were the above three misleading and deceptive statements or omissions intentional?

To test a subjective state of mind at a past time one must examine the surrounding contemporaneous circumstances. In this case, when one does so, the conclusion comes that the three misleading and deceptive statements or omissions were intentional.

The gravity of the subject matter, the clear paper trail created by the three ASIC documents [25] and the vast number of similar documents created by the ASIC 4 and their FSE colleagues, the seniority, training and experience of the ASIC 4, ASIC’s mandatory processes for preparing and reviewing all emails before they are sent, and the absence of a corrective email or other apologetic correspondence point overwhelmingly to this being intentional.

It is virtually certain the ASIC 4 intended to mislead and deceive Dover and Terry.

In the unlikely event the ASIC 4 just made a mistake and did not mean to mislead Dover and Terry, the 6 June 2017 email was objectively apt to mislead and otherwise culpably negligent.

This too is a serious breach of ethics. There is no way around it.

Why no retraction or correction of the ASIC 4’s 6 June 2017 email?

The events since 6 June 2017 show the ASIC 4’s 6 June 2017 email to be inaccurate and incomplete. If this inaccuracy and incompleteness was not deliberate why have the ASIC 4 not written to Dover to correct their 6 June 2017 email? Ethical solicitors correct their errors. The absence of a retraction or a correction by the ASIC 4 shows their actions were deliberate. Deliberately misleading and deceptive. This is serious breach of the VLSB rules.

How did Dover respond to James McAllister-Harris’ email dated 6 June 2017?

Dover had no idea ASIC was being misleading and deceptive and not disclosing its real concerns. Dover and Terry trusted ASIC[26]. They even invited ASIC to audit Dover. Dover believed ASIC was complete with the truth, Dover never suspected ASIC’s real concerns would be hidden from Dover.

Dover did not doubt for one second the correctness of the James McAllister-Harris and Inakshi Rajadura’s email dated 1 June 2017.Dover and Terry did not dream ASIC wanted to set them up at the Royal Commission. Who would doubt the honesty and integrity of an ASIC solicitor? Dover relied on the ASIC 4 and James McAllister-Harris’ email dated 6 June 2017.

Dover instructs fresh consultant’s reports

On receiving ASIC’s 1 June 2017 email Dover commissioned each of Sophie Grace and Integrity Compliance to investigate and report on the concerns raised by ASIC, ie

  1. the appointment and on-going monitoring of representatives (ie onboarding processes)
  2. the quality of advice provided by representatives
  3. the steps taken by Dover to remediate any representative misconduct.

Both law firms reported favourably.

Dover thought it was the end of the matter.

 Nine significant consultants’ reports in the previous four years

Further, over the previous four years Dover engaged with nine expert consultants. None expressed concerns about these three matters. They include reviews by Deloitte, Australian Super, PricewaterhouseCoopers, First State Super (an extremely detailed review cantered on Terry’s advice to doctors prior to an offer to buy Terry’s financial planning practice). They also include 3 reports by Holley Nethercote[27], 1 by Imac Legal, 2 reports by Sophie Grace and 1 report by Integrity Compliance[28]. MLA Lawyers checked every SOA and attended compliance committee meetings.

Each of the expert reports included minor recommendations for improvement. None expressed a major concern. The overwhelming theme was Dover had excellent processes.

In 2013 Holley Nethercote said Dover had the most robust advice review processes it had seen.

Don’t forget, Dover had 12 legally qualified staff looking at every SOA before it went to the client. From October 2016 every SOA was reviewed for the best interests duty and its appropriateness to the client by an independent law firm, MLA Lawyers.

Dover voluntarily gave ASIC the 2016 Holley Nethercote/iMac legal report which discussed Dover’s Client Protection Policy at length. Dover did not hide a thing. ASIC dismissed the 2016 Holley Nethercote/iMac report as incompetent but did not bother to tell Dover.

Not one mentioned the CPP was deceptive. Not one was concerned about any egregious conduct schemes such as premature super release scams and SMSF property scams (because there was none). So Dover did no more. Dover thought it had its compliance bases covered.

The 2016 Holley Nethercote report

The 2016 Holley Nethercote report discussed the CPP at length. Dover told ASIC about the CPP. ASIC determined the CPP was deceptive but did not tell Dover. This was despite Dover’s numerous requests and undertakings.

The ASIC 4 omitted the CPP in their 6 June 2017 letter. They did not tell Dover ASIC dismissed the Holley Nethercote report (and the Sophie Grace Report) as incompetent[29].

This was to mislead Dover and help ASIC set Dover up for the Royal Commission[30].

What would Dover had done if the ASIC 4 had advised Dover of ASIC’s real concerns?

If ASIC had advised Dover of its real concerns Dover would have honoured its undertaking to rectify as stated in its email to James McAllister-Harris on 1 June 2017. This would have involved immediately agreeing to change the CPP and to advise affected clients immediately and completing without demur any other remediation required by ASIC.

This is not a wishful counterfactual. A fantasy retrospective reconstruction to be dismissed by the court as self-serving assertion. It is what Dover did in late March and early April 2018 once ASIC finally notified Dover of its “serious” concerns regarding the CPP. Dover completed a 100% remediation in less than two weeks with no client complaints. As per its undertaking to rectify back on 1 June 2017.

Compare this to ASIC’s ongoing battles with the AMP as noted above or, say, the bank AFSLs over the fee for no service scandal. The banks are still arguing after all these years.[31] This is despite tens of thousands of client complaints billions of dollars in client fees for no service.

Imagine the outcry if ASIC misled or deceived the AMP or a bank AFSL?

The phrase “serious concerns” is in inverted commas because one must seriously doubt ASIC’s sincerity in using the adjective “serious”. ASIC believed the CPP was deceptive in 2016. ASIC could have told Dover of its “serious concerns” at any time. ASIC obviously actively decided to not tell Dover of its “serious concerns” until just before the Royal Commission: can anyone seriously doubt this is a serious set up of Dover by ASIC and, probably, the Royal Commission[32]. Yet Mr Costello had the temerity to suggest Orwellian connotations!

As to ASIC’s other concerns, Dover would have engaged with ASIC, as per Dover’s requests for feedback, to explain the ASIC investigations staff[33] made serious errors when they reviewed Dover. Dover was not engaged in egregious conduct described in the three ASIC documents. ASIC’s many errors and misunderstandings are compiled in the attached appendices. They reveal a deep-seated Dover malice and an ASIC incompetence.

This is detailed in ASIC’s review of “Terry’s advice to Dr Amit: a study in incompetence” and “ASIC’s review of Flo’s advice to Katrina: another study in incompetence”.

Dover would have explained to ASIC that Peter Kell’s engagement on the matter was misinformed. There was no need to close Dover down, using injunctions under section 1101B or section 1324 of the Corporations Act, or otherwise. This is exactly what Dover said it would do when Terry wrote twice to James McAllister-Harris and Inakshi Rajadura on 1 June 2017, as reproduced above. Terry expressed his concerns about mitigating any client damages and undertook to rectify any compliance breaches.

Remember, Dover completed the remediation of the Client Protection Policy within 14 days of being asked to do so by ASIC in March 2018.

However, all of this remains conjecture. This is because the ASIC 4 did mislead Dover by omitting ASIC’s serious concerns from their email dated 6 June 2017. They chose to not tell the truth. They chose to  mislead and deceived Dover. We will never know for sure what otherwise would have happened.

The ASIC 4 breached the VLSB rules ie the behaviour standards expected of solicitors

The ASIC 4 misled Dover and Terry by in effect saying ASIC’s concerns “were around”:

  1. the appointment and on-going monitoring of representatives
  2. the quality of advice provided by representatives
  3. the steps taken by Dover to remediate any representative misconduct.

They did not say ASIC’s real concerns were around issues such as the Client Protection Policy and that for other reasons ASIC wanted to shut Dover down from 2016 on.

In doing so the ASIC 4 fell short of, and seriously breached, the behaviour standards expected of solicitors set out in the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015[34] and the behaviour standards expected of public officers, as discussed above.

Why did the ASIC 4 breach the VLSB rules?

There is an irresistible inference the ASIC 4 breached the behaviour standards expected of solicitors and public officers as a key part of ASIC’s wider strategy to damage Dover and Terry.

This strategy included:

  1. denying Dover the opportunity to rectify a shortcoming, as per Terry’s undertaking on 6 June 2017, which would negate ASIC objective of closing Dover and
  2. facilitating Dover and Terry being called as witnesses in the soon to be announced Royal Commission into Misconduct in the Banking Financial Services and Superannuation Industry (the Hayne Royal Commission).

In June 2017 Australia was waiting for the Government to cave to calls for a Royal Commission. Ian Verrender’s August 2017 article is but one echo of the times. ASIC was not going to let Dover honour its undertaking to rectify an inadvertent error. That was not in its plan.

ASIC wanted to expose the Client Protection Policy and Terry’s alleged egregious conduct in front of a live audience, telecast live to the Australian financial planning world, locked in forever on Youtube.

The ASIC 4 shed their lawyers’ ethics to play the ASIC party line. They forgot their paramount duty and the VLSB rules that controlled their professional behaviour.

This makes the ASIC 4’s conduct particularly heinous and malicious. They with Peter Kell and other ASIC executives intended to do significant commercial and reputational damage to Dover and Terry. They succeeded. The ASIC 4 intended to do significant commercial damage and reputational damage to more than 400 Dover advisers. They succeeded.

How would the Royal Commission have proceeded?

If the ASIC 4 had not engaged in misleading and deceptive behaviour and had provided Dover with the same information ASIC later provided the Royal Commission Dover would have rectified or otherwise settled ASIC’s concerns in June 2017.

This includes ASIC’s concerns regarding the Client Protection Policy.

In other words, the ASIC 4’s misleading and deceptive conduct caused Dover to appear at the Royal Commission and caused the closure of Dover.

A closing thought

One is reminded of Bill Woodfull’s famous words during the 1939 Bodyline test series[35]

A postscript: a little too late. The ASIC 4 finally check in with FOS

A bit belatedly in July 2018 Andrew Thomas and James McAllister-Harris reported back to senior managers, Glenn Childs, Dover had a low Financial Ombudsman Service complaint rate.

Dover had an extremely low FOS complaint rate. Dover’s FOS complaint was about 1/10th of what it should have been for an AFSL of its size. Based on the number of advisers at June 2018 Dover ought to have had 60 FOS complaints a year. This suggests Dover’s consultants, ie Deloitte, PricewaterhouseCoopers, Australian Super, First State Super Holley Nethercote, Sophie Grace, Imac Legal and Integrity Compliance, got it right[36].

The ASIC 4 got it wrong[37]. They seriously breached their ethical obligations as they did.

 

[1] Appears to have since left ASIC’s employment

[2] Appears to have since left ASIC’s employment

[3] You can read an interesting article contrasting Mullaly’s soft attitude to large corporations with his hard attitude to defenceless 63-year-old women here: TBC

[4] See the references to criminal investigations in the closing paragraphs of the 29 June 2018 enforceable undertaking

[5] As we explain in those chapters ‘mistakes” is a euphemistic term. Their density and frequency of the “mistakes” leads one to conclude they are intentional, ie another part of the how ASIC set Dover up story. Mere incompetence cannot explain these “mistakes”.

[6] ASIC sought such injunctions successfully on 5 February 2018 against Wealth & Risk Management Pty Ltd and Joshua Fuocco. Interestingly, Terry is mentioned by Moshinsky J at paragraph 54 of this case. In one of life’s funny coincidences Terry McMaster reported WRM and Joshua Fuocco to ASIC in 2013 and 2015. It seems ASIC then confused Terry’s genuine “McMasters’ Commission Rebate Scheme” which refunded more than $1m a year to clients with the fraudulent “WRM Cash Rebate Scheme”.

[7] https://www.legislation.nsw.gov.au/#/view/regulation/2015/244/part2/divfundamental/rule3

[8] See for example Gianarelli v Wraith (1988) CLR 543 572 “Gianerelli”

[9] Giannarelli 556

[10] A copy is attached as an appendix

[11] The 2016 Holley Nethercote report is reproduced and discussed in full in chapter 4. In summary, it analyses Dover’s SOA procedures and Client Protection Policy, and concludes all is in order. This report was voluntarily provided to ASIC despite being a legally privileged document. Dover did this in good faith. Amazingly, the ASIC executives , Andrew Davison and Leah Sciacca, dismissed the 2016 Holley Nethercote report (and a similar Sophie Grace Report) as incompetent. But worse, they did not tell Dover they had done this.

[12] Attached as an appendix

[13] Amazingly, ASIC claims there is no other record of Peter Kell’s characteristically awkwardly worded direction to close Dover down. ASIC’s FOI unit advised Dover on 14 March 2019 that no documents existed or no documents could be found which related to this statement. Dover asked for this FOI decision to be reviewed. ASIC reviewed it and on 5 April 2019 affirmed its original decision. It is amazing that an ASIC Deputy Commissioner, Peter Kell, can in effect order his staff to close a large AFSL, ie Dover, without creating a document other that the one you see above, as it appears in the Stakeholder Referral Paper.

[14] ASIC’s Financial Advice team, headed by Louise Macaulay and Joanna Bird

[15] ASIC’s Financial Services Enforcement team, headed by Tim Mullaly

[16] Dover’s request was confirmed in writing by ASIC in May 2016

[17] Not 2017, as stated in numerous ASIC media releases since April 2018

[18] You may have noted the reference Holley Nethercote in Paragraph 30 of ASIC’s Dover Discussion Paper dated 12 December 2016 reproduced above. The 2016 Holley Nethercote report is reproduced and discussed in full in chapter 4. In summary, it analyses Dover’s SOA procedures and Client Protection Policy, and concludes all is in order. This report was voluntarily provided to ASIC despite being a legally privileged document. Dover did this in good faith. Amazingly, the ASIC executives , Andrew Davison and Leah Sciacca, dismissed the 2016 Holley Nethercote report (and a similar Sophie Grace Report) as incompetent. But worse, they did not tell Dover they had done this.

[19] There are other e-mails from Dover to ASIC like this, ie asking for meetings and seeking feedback. By and large ASIC ignored them. Dover should have been like AMP and asked the ASIC head honchos out for a meal at a posh restaurant instead

[20] The Holley Nethercote/Imac Legal opinion discussed the Client Protection Policy at length: Dover was an open book and did not hid a thing from ASIC. The 2016 Holley Nethercote report is reproduced and discussed in full in chapter 4. In summary, it analyses Dover’s SOA procedures and Client Protection Policy, and concludes all is in order. This report was voluntarily provided to ASIC despite being a legally privileged document. Dover did this in good faith. Amazingly, the ASIC executives , Andrew Davison and Leah Sciacca, dismissed the 2016 Holley Nethercote report (and a similar Sophie Grace Report) as incompetent. But worse, they did not tell Dover they had done this.

[21] The two sets of rule theory is entrenched in ASIC’s culture of going soft on the banks. See for example, ASIC’s Daniel Crennan’s statement as reported in the SMH and the Age on 23 March 2019 by Sarah Danckert when discussing the banks’ many serious breaches of the financial services law: “Removing a licence of a major bank or suspending it is not going to help anybody or the Australian economy.” Daniel Crennan: Former bouncer… wants justice

 

[22] ASIC’s Financial Advice team, headed by Louise Macaulay and Joanna Bird

[23] ASIC’s Financial Services Enforcement team, headed by Tim Mullaly

[24] This leaves licence cancellation via a court action, ie injunctions under section 1324 and section 1101B of the Corporation Act

[25] ASIC’s FOI Unit has advised Dover more than 1700 documents recorded the meetings around these matters between various ASIC business units including the ASIC 4’s unit, the Financial Services Enforcement Unit, over December 2016 and January 2017.

[26] The realisation that ASIC, the corporate regulator, engaged in nefarious activities threw Terry into a long and deep depression.

[27] The 2016 Holley Nethercote/iMac Legal report is discussed at length in the appendix to this chapter. The 2016 Holley Nethercote report is reproduced and discussed in full in chapter 4. In summary, it analyses Dover’s SOA procedures and Client Protection Policy, and concludes all is in order. This report was voluntarily provided to ASIC despite being a legally privileged document. Dover did this in good faith. Amazingly, the ASIC executives , Andrew Davison and Leah Sciacca, dismissed the 2016 Holley Nethercote report (and a similar Sophie Grace Report) as incompetent. But worse, they did not tell Dover they had done this.

[28] See the draft chapter Why didn’t anyone else see what ASIC saw? for a full explanation of these consultants’ compliance reports

[29] See paragraph 33 of the ASIC Paper

[30] The 2016 Holley Nethercote/iMac Legal report is discussed at length in the appendix to this chapter. The 2016 Holley Nethercote report is reproduced and discussed in full in chapter 4. In summary, it analyses Dover’s SOA procedures and Client Protection Policy, and concludes all is in order. This report was voluntarily provided to ASIC despite being a legally privileged document. Dover did this in good faith. Amazingly, the ASIC executives , Andrew Davison and Leah Sciacca, dismissed the 2016 Holley Nethercote report (and a similar Sophie Grace Report) as incompetent. But worse, they did not tell Dover they had done this.

[31] ASIC first brought the fee for no service issue to the bank owned AFSLs’ attention in 2013. They have been fighting ever since. Banks, ASIC still at war over fees for no service Tuesday 12 March 2019

[32] See “Hayne Hides His Helping Hands” for an explanation of how the Royal Commission helped ASIC build a false narrative on Dover

[33] Andrew Davison and Leah Sciacca

[34] https://www.legislation.nsw.gov.au/#/view/regulation/2015/244/part2/divfundamental/rule3

 

[35] This famous phrase has become a metaphor for fairness and even-handedness, and the lack thereof, as illustrated in this chapter on the duplicitous and deceptive ASIC 4.

[36] See “Why didn’t anyone else see what ASIC saw” for a full account of these expert consultants reports

[37] One would have thought expert ASIC lawyers would have checked a bit earlier. But why look for something you do not want to find?

The Dover Group