On August 5, 2019, ASIC released the following information in a media release:

“ASIC has permanently banned former financial advisor Robert Shane Michael of Bentleigh, Victoria, from providing financial services for engaging in misconduct which included dishonestly borrowing money from his clients’ [self-managed superannuation fund (SMSF)] accounts and using them for his own personal expenditure.

From August 2009 to July 2017, Mr. Michael was an authorized representative of Marigold Falconer International Pty Ltd and Allied Financial Solutions Pty Ltd through his business RM Wealth Management Pty Ltd.

ASIC’s investigation found that between April 2012 and September 2018, Mr. Michael had engaged in dishonest and misleading and deceptive conduct by [obtaining] loans from four of his clients’ SMSF

accounts totaling $204,000. The loans were used for his own personal expenditure which included [delaying] bankruptcy, paying private school fees, gambling and general expenses.

ASIC also found that Mr. Michael:

• failed to disclose commissions on financial investments that he recommended and implemented on behalf of clients;
• recommended financial investments without disclosing that a conflict of interest existed;
• failed to prioritize his clients’ interests ahead of his own;
• failed to act in the best interest of his clients in relation to loans [obtained] from clients and recommending high risk investments which were contrary to clients’ risk appetites;
• failed to provide clients with statements of advice, product disclosure statements and fee disclosure statements; and
• engaged in unlicensed financial advice beyond the [end] of his authorization as a financial adviser.

On 26 July 2019, ASIC found that Mr. Michael had breached financial services laws and was not of good fame and character. “

Required:

1. a). Who would have placed their trust in Mr. Michael? Has Mr. Michael broken the trust relationships with the parties you have identified? If so, describe the behaviors or actions by Mr. Michael that led to the breach in trust. Explain why these behaviors or actions would have been perceived as untrustworthy.
2. b). For each of the behaviors or actions that you identified in part (a), describe which principles in the CFA Institute Code of Ethics Mr. Michael has not complied with.   Explain why these behaviors led to non-compliance with the principles you have mentioned. 
3. c). Identify which of the professional motivations (or ‘logics’) was used by Mr. Michael in his relationships with his clients. Justify your answer by reference to the facts of this case. Which of the professional motivations (or ‘logics’) should Mr. Michael have used in his relationships with his clients? Justify your answer by reference to the Fundamental Ethical Principles that are relevant to this case. 

Answer rating: 100% (QA)

Answer Answer 1 The parties who have placed trust in Mr Robert Shane Michael are Marigold Falconer International Pty Ltd Allied Financial Solutions Pty Ltd Stakeholders of RM Wealth Management Pty Ltd ... View the full answer