AAT upholds ASIC decision to refuse Allegra a licence

ASIC’s decision to refuse Allegra Financial Services Pty Ltd (Allegra) an Australian financial services licence (AFSL) to provide personal financial product advice to retail and wholesale clients has been affirmed by the Administrative Appeals Tribunal (AAT).

On 30 November 2020, the AAT found that Allegra’s controller, sole director and proposed responsible manager, Lachlan Schonfelder, engaged in conduct such that it could not be satisfied that Allegra would provide financial services efficiently, honestly and fairly. The lack of candour in Mr Schonfelder’s dealings with ASIC also raised serious doubts in the AAT’s mind as to whether Allegra would be able to deal honestly.

Mr Schonfelder accepted a personal loan from a client while he was an authorised representative of another licensee and his employment was terminated. Allegra failed to disclose this in its application and Mr Schonfelder provided misleading information to ASIC regarding the reasons that he ceased employment with the licensee.

In making its decision, the AAT’s decision turned on Mr Schonfelder’s past conduct, and on his potential future conduct, given the central role he plays in the business and operations of Allegra.

ASIC Commissioner Danielle Press said the decision is a clear reminder to applicants that they must deal openly and honestly and provide full and frank disclosure to ASIC when applying for a licence and responding to requests for additional information.

‘ASIC has fundamental concerns with Mr Schonfelder, and the AAT’s decision emphasises that these concerns cannot be solved by attempting to outsource compliance and monitoring to a third-party.’

‘The decision reinforces the recent licensing reforms under the Financial Sector Reform (Hayne Royal Commission Response-Stronger Regulators [2019 Measures]) Act 2020 which provide that ASIC must not grant a licence unless it has no reason to believe a controller, officer or senior manager is not a fit and proper person to provide financial services, or perform one or more functions as an officer of the applicant if a licence was granted. The character of these persons remains a critical aspect of ASIC’s licensing assessment’, Ms Press said.

Background

Allegra applied to ASIC for an AFSL on 17 April 2018. Mr Schonfelder is Allegra’s sole director and majority shareholder and its nominated sole responsible manager.

On 15 July 2019, a delegate of ASIC refused Allegra’s licence application under s913B of the Corporations Act 2001. The delegate was particularly concerned about the certain past conduct of Mr Schonfelder.

Allegra appealed ASIC’s decision to the AAT on 13 August 2019.

Allegra has 28 days to appeal the AAT’s decision to the Federal Court of Australia on a question of law.

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