Financial Firm to Pay $106,000 for Mis-Managed Discretionary Account, Says AFCA

A financial firm was found to have mismanaged a Managed Discretionary Account (MDA), resulting in significant losses for the complainants.

Complaint

Between 2013 and 2019, First Samuel Limited was engaged to operate a Managed Discretionary Account (MDA) for the complainants through which the SMSF’s monies were to be invested in line with its investment strategy.

The complainants said that the financial firm:

  • failed to provide the MDA service with due care and diligence
  • failed to maintain an appropriate asset allocation for the complainants
  • invested in products that were outside the scope of the MDA arrangements and
  • failed to have effective oversight of the Chief Investment Officer (CIO) and his decisions.

As a consequence of not receiving the contractual services, the complainants sought compensation of $280,000, which includes a refund of $180,000 in service fees paid.

The financial firm said it fulfilled its contractual and legal obligations to the complainants at all relevant times and provided appropriate advice and services.

AFCA’s Findings

AFCA found the financial firm was engaged to provide an MDA service in the best interests of the complainants and failed to do so when it allowed the SMSF portfolio to stray from the target asset allocation, thereby incurring more risk and greater exposure to investments which ultimately have suffered a significant decline in value.

AFCA determined it was fair that the financial firm compensates the complainants for the losses caused by this conduct.

Determination

This determination was in favour of the complainant. The financial firm was required to pay compensation in the amount of $106,008.48, plus interest.

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