Andre*, who was a quadriplegic, and his sister Eve* were Trustees in a Family Trust. In 2013, the Trust arranged an investment through Tony*, an Authorised Financial Adviser (AFA). From November 2017 to May 2018, Andre emailed Tony requesting 5 withdrawals from the investment.
Tony arranged the withdrawals (totalling $189K) to be moved into the Trust’s bank account. In June 2018, Eve told Tony that Andre had been scammed, and the $189K had gone. Andre believed he’d paid the money to a woman he’d met online who was moving to NZ to marry him and would bring the money back.
Eve alleged Tony had breached a duty of care to the Trust and failed to provide financial advice, because he didn’t question, discourage, or alert her to the withdrawals. She also said, by not requesting a signature, Tony had breached the terms of the agreement.
As an AFA, Tony was required to exercise reasonable care and skill under the Consumer Guarantees Act 1993 and the Financial Advisers Act 2008, and to follow standards of professional conduct under the Code of Professional Conduct.
In this case, Tony’s specified scope of service was to provide advice about the Trust’s lump sum investment. Under the agreement, Tony was authorised to carry out withdrawal requests and, in enabling withdrawals, he was not required to provide financial advice, obtain a signature, or check with other Trustees. Without an agreement in place to ensure both Trustees had oversight over withdrawals, it wasn’t reasonable to require Tony to question Andre, or check with Eve. Tony did contact Andre about the largest withdrawal and was told it would be repaid soon.
Tony placed the withdrawn money into the Trust’s bank account, but had no oversight over subsequent transactions.
The case manager considered Andre’s vulnerability, because of his health issues and his exposure to a scam. However, Andre had been involved in previous investment decisions, and Andre (not Eve) reviewed the investment with Tony every year. There was no reason for Tony to treat the withdrawals with suspicion, or assume Andre couldn’t make financial decisions.
Although the case manager had considerable sympathy for Andre and Eve, there was no evidence Tony failed to meet his obligations, or that he had failed to act with reasonable care and skill.
Complaint not upheld
*Names have been changed.