AFS Licensee and Responsible Manager Failings – ASIC Enforcement

ASIC has cancelled the Australian Financial Services Licence ("AFSL") of Financial Services Group Australia Pty Ltd ("FSGA") and permanently banned its Responsible Manager ("RM"), Graham Holmes ("Mr Holmes"). This enforcement action highlights the importance of robust governance and compliance frameworks for AFS licensees and their RMs.

Following a targeted review, ASIC identified several significant breaches of the Corporations Act, including:

• Providing Inadequate Financial Advice: Failure to ensure that financial product advice provided by representatives was appropriate and in clients' best interests.
• Resource Deficiencies: Insufficient financial and human resources to support the services authorised under the AFSL.
• Competence Issues: Failure to maintain organisational competence.
• Regulatory Non-Compliance: Repeated failures to lodge financial statements and breach reports as mandated by the Corporations Act.
• Financial Solvency Breach: Total liabilities exceeding assets over two consecutive financial years.

ASIC found that Mr Holmes accepted RM fees while failing to fulfil his duties under section 921A(1)(e) of the Corporations Act, leading to his permanent ban from providing financial services. His banning is recorded on ASIC's banned and disqualified register.

Key takeaways for all Responsible Managers

This latest example of ASIC's enforcement highlights ASIC's expectations of RMs and that ASIC will take action against RMs that do not fulfill their duties. ASIC's expectation is that RMs are involved in and are responsible for the significant day to day decisions about the provision of financial services by the AFSL.

All AFS licensees should take this opportunity to review their governance arrangements and ensure they have robust controls in place. Likewise, RMs should consider their responsibilities and duties and whether they are in fact taking an active approach to them. Key areas of focus for RMs and AFS licensees include:

1. Monitoring provision of financial advice and services - AFS licensees have an obligation to adequately supervise any authorised representatives that provide financial services under their licence, and therefore RMs should be active in monitoring representatives and assist the licensee to develop processes and procedures to ensure that any financial product advice or financial services provided by authorised representatives, fall within the scope of the AFSL.
2. Maintaining adequate resources - RMs should be involved in reviewing the financial position of the AFS licensee, and assist senior management to regularly assess and adjust financial and human resources to align with the scale and complexity of services offered under the AFSL.
3. Organisational competence - systems and procedures should be implemented to maintain and demonstrate organisational competence, including continuous professional development for RMs. Where a RM leaves the business, or the AFSL is varied to change the scope of services, senior management should conduct an assessment of organisational competence and liaise with RMs to ensure their training is up to date.
4. Timely regulatory reporting - establishing internal processes to help to ensure the timely lodgement of breach reports, well ahead of statutory due dates. RMs should be involved in decisions about whether to lodge breach reports to ASIC, including the rectification of breaches or incidents that occur.

Background

ASIC is continuing its investigation into Ferras Merhi, who served as FSGA's Sole Director from February 2021 to May 2025. Concerns have emerged regarding advice provided by certain authorised representatives linked to FSGA, particularly concerning investments in the Shield Master Fund and the First Guardian Master Fund. ASIC is currently investigating these matters, including the activities of Ferras Merhi. Court orders have been obtained to freeze Mr. Merhi's assets, indicating the seriousness of the ongoing investigation. ASIC provides updates on these matters on its Enforcement Activitiespage.

Further Reading

• Bannings and Alerts
• AFS Licensees - Are you Complying with your Financial Obligations?
• AFSL Training Obligations
• 25-024MR Federal Court freezes assets of Melbourne financial adviser, Ferras Merhi of Venture Egg and FSGA.
• Regulatory Guide 105AFS licensing: Organisational competence

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.