Former Plan B executive Mr Newman was officially appointed as the managing director of WealthSure yesterday, after the dealer group agreed to an enforceable undertaking (EU) with the Australian Securities and Investments Commission (ASIC).
The EU refers to ASIC’s surveillance of the firm between December 2010 and June 2012, which identified "a number of concerns regarding WealthSure’s compliance program, policies, procedures and controls".
In order to address ASIC’s concerns, WealthSure has undertaken to engage an independent expert who will deliver a series of interim reports about the firm’s compliance framework – culminating in the submission of a final report to ASIC in October 2018.
Mr Newman's appointment came as former managing director and co-founder of WealthSure Darren Pawski made an undertaking with ASIC to step down from his role and remove himself from the financial services industry indefinitely (although he remains a major shareholder of WealthSure).
Mr Newman has been behind the scenes as a consultant at WealthSure since September 2012.
Speaking to InvestorDaily, Mr Newman said he and WealthSure’s legal representative have been working with ASIC to come up with a "package of solutions" to address concerns raised by the regulator.
He pointed out that ASIC acknowledges in the EU that WealthSure has “made progress” in the last six months.
According to the EU, a number of new staff have been hired, compliance consultants have been engaged, a review of representatives has begun, compliance staff have been provided with external training, an 'Adviser Academy' has been put into place and an audit and risk management committee has been established.
"I’m not uncomfortable with anything that’s [in the EU]. They were things that we would need to do in normal circumstances," said Mr Newman.
In fact, the EU has provided WealthSure with the framework it needs to hold itself to account as a non-aligned dealer group, he said.
"For instance, as a normal course of business I would be expecting that we would have the organisation independently reviewed every year – with or without the EU," said Mr Newman.
WealthSure has appeared in the financial press in recent weeks, after Mr Newman was quoted in a 24 June Federal Court judgement arguing that the dealer group could become insolvent if a stay were not granted on the payment of a client claim.
“The issue was that all parties – [our professional indemnity insurer] QBE, the lawyers representing QBE and therefore ourselves – were keen to press on with an appeal because the judgement was manifestly wrong,” said Mr Newman.
There was uncertainty about whether QBE would immediately pay out the claim if the stay were not granted – or whether the insurer would decide to wait for the outcome of the appeal, he said.
"However, we won the stay. QBE then paid it fully – providing a sum of money as per the terms of the stay," he said.
The appeal is ongoing.
"So the reality is that it's not going to cause us any grief at all – and ASIC were right across it," said Mr Newman.
If ASIC had any concerns about WealthSure's financial viability, it would not be pressing on with the EU, he pointed out.
"We’re not in as bad a shape as some people are suggesting. We’re not going to imminently collapse," said Mr Newman.
WealthSure has already terminated more than 100 representatives as it looks to focus on its remaining 230-strong "core of loyal and quality advisers".
