Introduction: Dover requests an audit
On 22 April 2016 Terry met with Louise Macaulay, ASIC’s senior executive leader for financial advice. Terry and asked Louise to audit Dover. Terry’s request came during a meeting where Louise demonstrated she did not understand Dover’s processes for reviewing SOAs. Terry asked for the audit because he wanted to prove to Louise and ASIC that Dover had sound compliance processes. Louise obliged, and the audit started a month or so later.
ASIC’s “Dover Financial Advisers Pty Ltd (‘Dover’)- Discussion Paper dated 12 December 2016 (the first ASIC Paper) was written by Andrew Davison and Leah Sciacca (the officers).
The ASIC officers visited Dover’s office in May 2016 They stayed for an hour at the start of the (Dover requested) audit. After that there was no contact. No further meetings. No telephone calls. No feedback. All requests were denied. Radio silence. The officers worked from Brisbane. If they wanted information they served formal Corporations Act notices on Dover. Throughout 2016 and 2017 there were long periods with no contact.
The officers declined all Dover’s liaison overtures. Even an unequivocal and unqualified undertaking to rectify any of ASIC’s concerns. This radio silence lasted until 6 June 2017 when, as we detail below, ASIC’s FSE Unit provided false and misleading information to Dover ASIC’s audit concerns, omitting ASIC’s concerns the Client Protection Policy was deceptive.
ASIC’s “do not communicate or engage with Dover” strategy
The ASIC non-engagement is critical to understanding ASIC’s malice. This malice went as far as the officers not informing Dover ASIC thought its 2016 Holley Nethercote and Sophie Grace legal reports were incompetent. Dover voluntarily provided these legally privileged reports to ASIC to help ASIC understand Dover’s procedures.
The 2016 Holley Nethercote report discussed Dover’s Client Protection Policy (CPP) in detail.
The officers decided the CPP was deceptive in 2016. But ASIC did not tell Dover. ASIC sat on this information until just before the 2018 Royal Commission.
Dover relied on the 2016 Holley Nethercote and Sophie Grace legal reports. Dover reasonably assumed these reports would be accepted by ASIC. Dover did not have to provide these reports to ASIC, but it did. Dover acted in good faith. ASIC did not act in good faith. Good faith and fair play required the officers to at least let Dover know they had dismissed the legal reports as incompetent and believed the Client Protection Policy was deceptive.
Paragraph 30 of the first ASIC paper reads:
Contrast ASIC’s approach to the nine consultancies between 2013 and 2016
Nine consulting groups reviewed Dover in the years 2014 to 2017. They were First State Super, Australian Super, Deloitte, PricewaterhouseCoopers, Holley Nethercote, Imac Legal, Sophie Grace, MLA Lawyers and Integrity Compliance. Each consultant spent weeks on the ground checking Dover and McMasters’ systems and validating all was in order.
They each took a deep dive and surfaced to say: “all is well at Dover”.
How did the ASIC officers come to such different conclusions?
Five ASIC examples to shut Dover down
ASIC’s first paper uses five examples to make its case Dover should be shut down.
Paragraphs 33 to 36 under the heading “Summary of ASIC’s Concerns” are blacked out. As are paragraphs 37 to 39. So the non-ASIC reader misses out on the juicy bits, what exactly ASIC wanted to do to Dover back in late 2016. One can assume it was not pleasant for either of Dover or Terry McMaster. It is pretty clear ASIC wanted to shut Dover down in 2016.
To the uninformed reader the first paper looks competent, with reasonable conclusions based on the embedded case studies number 1 to 5. But to the informed reader the look is different. ASIC’s first paper is incompetent. Virtually every sentence incorrect and misleading and deceptive.
The ASIC officers knew what they were expected to find and made sure they found it. Their five Dover case studies are reproduced below.
In chapters 4 to 11 we take each of ASIC’s five example apart line by line to show them to be false, misleading and deceptive. In summary, nothing more than a bunch of lies.
Please read each of their five case studies closely:
Example 1 – Appointment processes
Example 2 Dover SOA review process
Example 3 Advice of Terry McMaster
Example 4 Advice of Florence Tee
Example 5 Client remediation following adviser termination
In chapters 4 to 16 we take each case study in turn and show it to be completely wrong.
The ASIC officers had barely one hour’s contact with Dover, and worked from Brisbane.
Based on the above five case studies they recommended Dover be closed in 2016 using section 1101B and section 1324 Corporations Act injunctions against Terry McMaster.
Six preliminary questions to carry in mind:
- Why didn’t the nine other (on the ground) consultants, including Deloitte and PricewaterhouseCoopers, see the corruption the ASIC officers saw (from their Brisbane office) in 2016?
- Why did the ASIC officers not tell Dover about their concerns in 2016?
- Why did ASIC’s FSE unit not tell Dover ASIC wanted to close Dover in 2017?
- What did ASIC’s FSE unit do during 2017?
- Why did ASIC not tell Dover it thought the CPP was deceptive in 2016? In 2017?
- Why did ASIC not tell Dover it though the CPP was deceptive until 22 March 2018, just a few weeks before Dover was called to the Royal Commission?
 Andrew Davison’s and James McAllister-Harris’ refusals to engage, followed by McAllister-Harris’ provision of misleading and deceptive information in June 2017, are detailed in chapter 13. This was a significant part of ASIC’’s set Dover up at the Royal Commission Strategy
 Financial Services Enforcement Unit, headed by Tim Mullaly
 James McAllister Harris’s June 2017 misleading and deceptive emails, where he listed three minor ASIC concerns and omitted two major ASIC concerns, are explained in Chapter 13 “ASIC’s in-house solicitors set Dover and Terry up for the Royal Commission
 Dover met Holley Nethercote at an ASIC sponsored seminar in 2012: Tim Nethercote and Grant Holley were the presenters
 These reviews are summarised in chapter 15
 The other later two ASIC papers discuss injunctions against Terry McMaster under section 1011B and section 1324 of the Corporations Act. This is discussed further in Chapter 23 “Injunctions against Terry McMaster: How far off target was ASIC?”