Novus Capital to Pay $239,000 To SMSF, Says AFCA

AFCA has determined that Novus Capital engaged in unauthorized share trading and deviated from the agreed trading strategy, leading to a compensation award of $239,379.67 to the complainant’s SMSF.

Complaint

This complaint is brought by Ms W and Mr JW as trustees for the W self-managed superannuation fund (the W SMSF). The W SMSF held a trading account with Novus Capital Limited. Ms W’s complaint is that the financial firm:

  • engaged in unauthorised share trading on the account
  • engaged in high-risk share trading, outside the parameters set in the Statement of Advice
  • conducted trading that was inconsistent with the SMSF’s needs and objectives
  • engaged in churning.

The financial firm says Ms W gave her son, Mr JW authority to transact and issue trading instructions on behalf of the SMSF and that Mr JW authorised all trades.

Issues and Key Findings

AFCA found that Novus Capital Limited engaged in unauthorised share trading, as the financial firm was unable to show it sought and obtained authority from the W SMSF prior to placing trades. Contract notes were not sent to either of the W SMSF’s trustees until August 2019. Further, the parties agreed on a trading strategy set out in the 2016 Statement of Advice. The actual trading was inconsistent with that trading strategy.

AFCA determined that the complainant is entitled to compensation based on the position it would be in if trading had been consistent with that agreed strategy. However, as the complainant was aware trading was occurring, they neglected trustee responsibilities to have proper oversight of that trading. Because of this, and the contract notes from August 2019, it was deemed fair to reduce compensation by 15% in recognition of the complainant’s own contribution to the loss.

The outcome is considered fair because the financial firm breached its obligations to the complainant, leaving it poorly informed of the trading that was occurring and its inconsistency with the strategy outlined in 2016.

Determination

This determination is in favour of the complainant. The complainant has 30 days to accept the determination. If it accepts, the financial firm must pay $239,379.67 to the W SMSF.

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