A Christchurch-based financial advice provider has had its licence cancelled by the Financial Markets Authority after it found a “serious and deliberate departure from standards” and that it had misled clients.
Hope Group Limited previously held a full financial advice provider licence, and provided personal risk insurance advice to retail clients.
This included life and health insurance, income protection insurance, and trauma and disability insurance, the authority said.
After it was alerted by the impacted insurer – which had terminated its distribution agreement – the authority reviewed 14 insurance policy applications submitted by Hope Group Limited’s sole director and financial adviser, Junpu Wang, on behalf of 13 customers.
Inquiries found “serious conduct issues”, which included submitting second policy applications for existing clients using incorrect or false customer information to conceal the policies were duplicates.
The company also completed an authority to accept a direct debit form on behalf of a client without obtaining the client’s authentic signature, and failed to obtain client consent for both first and second policies with the same or similar cover to remain active during a significant period, which caused clients to pay two premiums.
The Financial Markets Authority said Hope Group Limited had also misled clients by recommending second policies to benefit from premiums under a promotional offer, despite clients being ineligible for being already existing policyholders.
It said the adviser failed to ensure clients understood the advice provided, which included some cases where clients were incorrectly advised a new policy was needed because their existing policy would become more expensive after 24 months. In two cases, clients were told to take out a new policy to obtain a second luxury item, despite being ineligible for this benefit.
Financial Markets Authority executive director, response and enforcement, Louise Unger said Wang had also “deliberately misled impacted clients to take out second policies” after a 24-month clawback period.
Unger said this was done for the “sole purpose to obtain commission payments from the insurer”.
In doing so, the Financial Markets Authority said Wang and Hope Group Limited obtained $37,374 in upfront commissions. Clients also paid two premiums for the same or similar cover, while both policies remained active for up to 27 weeks, resulting in overpayments totalling $5342.34, it added.
“HGL and Mr Wang’s actions represent a serious and deliberate departure from the standards expected of a licensed financial advice provider,” said Unger.
“Mr Wang has not accepted his conduct, all allegations have been denied and attempts made to blame another financial adviser who was never engaged by Hope Group Limited at the time the applications were submitted.”
Unger said the cancellation of Hope Group Limited’s license was critical to protecting consumers, and the integrity of the market.
“A key function of the Financial Markets Authority is to ensure the quality of financial advice and financial advice services – which is clearly missing here.”
A public notification of the incident would help the authority raise awareness about the standards it expects, Unger added, which would deter future contraventions by other market participants.
She said it would also allow the authority to publicly express disapproval for contraventions under the FMC Act and the relevant regulations.
Wang and Hope Group Limited have since been deregistered from the Financial Service Providers Register. The insurer had also contacted all impacted clients and made arrangements to ensure they are supported.
The matter had also been reported to police.
