Broker ban by ASIC serves as industry warning

The mortgage brokerage industry has issued a warning, saying brokers should be proactive in confirming customer information or risk facing the wrath of the industry regulator.

The warning comes after the Australian Securities and Investments Commission banned a mortgage broker for five years after he delivered loan applications with false or misleading information.

Sydney-based Arthur Sperling of Statewide Financial Services was banned and his credit licence revoked after it was found he said some applicants had worked full-time, but in reality they had either not worked at the companies listed in the application, or only worked on a casual or part-time basis.

The incident raises questions about how serious ASIC is about policing this type of information.

Phil Naylor, the chief executive of the Mortgage and Finance Association of Australia, told SmartCompany this morning now ASIC has jurisdiction over this area, the market has been watching closely to see how hard it is on brokers who break the rules.

“Over the past couple of years ASIC has been pretty active in ensuring people who do transgress are dealt with harshly,” he says.

“We have our own disciplinary practices, and we’ve been expelling members for all sorts of things. This case in particular is breaking brokerage 101 rules, this is very clearly wrong.”

An ASIC spokesperson told SmartCompany that for small businesses engaging in credit activities “the National Credit Act requires credit licensees to meet responsible lending conduct obligations”.

The spokesperson said Sperling was the sole director of Tiana Holdings, which traded as Statewide Financial Services. He failed to “verify information submitted in loan applications”.

The action “blatantly disregards the fundamental principles of engaging in credit activities,” ASIC commissioner Peter Kell said in a statement.

“Those who do not adhere to their obligations will be removed from the industry,” he said.

ASIC said the 10 home loan applications at the centre of the case covered loans totalling more than $4 million.

Naylor says brokers have an obligation to “make sure they are not responsible for any fraud, and certainly not inadvertent fraud”.

“Sometimes a broker may be in a situation where accountants or someone else may pass on a client and detail their employment, but the broker still has to make sure all that information is verified.”

ASIC has been increasing its warnings – last week it said SMSF advisors would be targeted for giving faulty or misleading advice.