Perth-based Patersons Securities Ltd has agreed to a two-year review of its compliance procedures under an enforceable undertaking to the Australian Securities and Investments Commission, after an investigation into the firm's Canberra operations.
Perth-based Patersons Securities Ltd has agreed to a two-year review process of its compliance procedures under an enforceable undertaking to the Australian Securities and Investments Commission, after an investigation into the firm's Canberra operations.
The review, to be conducted by KPMG, will look into trading accounts, advice provision, risk management procedures, supervision of options trading and training, among other facets of Patersons' business, to see how well it adheres to compliance procedures and compliance documentation.
After the first six months, KPMG will supply Patersons a report outlining any deficiencies in the firm, which Patersons will address in a remedial action plan submitted to ASIC.
After this, Patersons will hire an independent compliance expert to further investigate it, and act upon any deficiencies found, and will repeat the process later the next year.
Patersons was forced into action after ASIC commenced an investigation into the conduct of employees in its Canberra office from October 2004 to November 2005.
The full text of an announcement from ASIC is pasted below
The Australian Securities and Investments Commission today accepted an enforceable undertaking from Patersons Securities Ltd to conduct a comprehensive review of its compliance procedures.
The undertaking follows an investigation commenced by ASIC into the conduct of employees in the Canberra office of Patersons in relation to trading on behalf of clients of Patersons. ASIC's investigation into this conduct is continuing.
ASIC is concerned that Mr Eric Hawley and Mr Scott McAlister, while they were advisers initially with Ord Minnett Securities (Ord Minnett), and from late 2004/early 2005 with Patersons, may have operated discretionary accounts without appropriate authority.
ASIC is also concerned Messrs Hawley and McAlister may have entered into risky derivatives positions on behalf of clients which were inappropriate for their circumstances and without adequately advising their clients of the risks.
Further, ASIC's investigation raised concerns about the adequate supervision of Mr Hawley and Mr McAlister while at Ord Minnett and Patersons.
ASIC was concerned that Patersons had inadequate systems and procedures in place relating to the:
- monitoring and supervision of the provision of advice to clients in its Canberra office;
- monitoring and supervision of the provision of financial services in its Canberra office;
- monitoring and supervision of the management of discretionary and non-discretionary client accounts;
- monitoring and supervision of the trading conducted by staff in its Canberra office;
- induction and training of staff in its Canberra office;
- transfer of clients and open derivatives positions from Ord Minnett to Patersons; and
- record keeping obligations in respect of the provision of advice and the execution of transactions in its Canberra office.
As a result of these concerns, Patersons has agreed to enter into the undertaking to have its compliance procedures reviewed by an external consultant over a two-year period and for any deficiencies to be rectified over this period.
ASIC has acknowledged that this matter has come to its attention following a notification by Patersons and that Patersons has co-operated with ASIC during its investigation.
'There are considerable risks when operating managed discretionary accounts. Financial services licensees must have comprehensive arrangements in place to manage these risks', ASIC's Executive Director of Enforcement, Ms Jan Redfern said.
ASIC is in ongoing discussions with Ord Minnett regarding its compliance procedures and will consider conducting a detailed review of Ord Minnett's procedures.
ASIC is also in ongoing discussions with Patersons and Ord Minnett to ensure that all clients who have suffered as a result of any misconduct by their advisers receive adequate compensation.
ASIC has obtained orders in the Federal Court of Australia against Mr Hawley requiring him to deliver his passport to his solicitor and restraining him from taking or sending assets out of Australia.
