A Melbourne-based financial planning business that charged advice fees to superannuation while claiming life insurance commissions has been fined $7.1 million. 

The Federal Court found three companies owned by Joshua Fuoco breached numerous financial services and consumer protection laws. They were Wealth and Risk Management, Yes FP (in liquidation) and Jeca Holdings (trading as Yes FS and in liquidation).

As a former director of the companies, Mr Fuoco knew of the breaches.

The court ordered him to pay a penalty of $650,000. He also agreed to an order restraining him from providing financial services for 10 years and to pay $100,000 towards the Australian Securities and Investments Commission (ASIC) costs and court costs.

An ASIC investigation found the companies required consumers to receive and implement financial advice that recommended switching super and taking out “high-end” insurance.

They charged advice fees that were paid out of consumers’ superannuation and used the upfront insurance commission generated by the financial advice to provide a “cash rebate” to clients. The process often resulted in substantial erosion of the clients’ super balances.

ASIC found while Wealth and Risk Management held an Australian financial services licence, it breached its obligations by failing to take reasonable steps to ensure authorised representatives acted in clients’ best interests and provide appropriate advice.

Yes FS carried on a financial services business without holding licence, made false and misleading representations and engaged in misleading and deceptive conduct.

The Federal Court ordered the companies be restrained from carrying on a financial services business for 18 years and be permanently restrained from offering cash payments in connection with the provision of financial advice.

“This is a significant outcome in a case where a financial services business has deliberately flouted the law and targeted financially vulnerable consumers,” ASIC Deputy Chairman Peter Kell said.