A Sydney financial advisor has been whacked with a life-time ban following an investigation which found he submitted falsified documents to earn commissions on life insurance policies.
Pavan Vyas was an authorised representative of financial advisory companies Lionsgate Financial Group and HNW Planning, and in this role he arranged insurance cover for clients.
During his time at these companies, the Australian Securities and Investment Commission discovered he had submitted 15 applications for life insurance policies using non-existent names and those of friends without their knowledge.
This practice is known in the industry as “tombstoning” and involves insurance brokers submitting names of dead or fictitious people.
To hide his conduct, Vyas also completed other fake documents including variations to the life insurance applications and bogus emails to the pretend clients.
“ASIC is about ensuring gatekeepers like financial advisors do the right thing and are held to account. When they fall short, ASIC will take direct enforcement action,” ASIC deputy chairman Peter Kell said in a statement.
SmartCompany was unable to contact Vyas.
Warfield and Associates chief executive Brett Warfield told SmartCompany these issues “go to the heart of the integrity of the industry”.
“People rely on financial advisors to look after their interests. This behaviour can impact company’s reputations, but also the individuals who often give their advisors carte blanche – power of attorney,” he says.
Warfield says financial advisors falsifying documents to gain commissions has become a problem throughout the sector, particularly in companies which outsource some services to third parties.
“The financial advisors are responsible for checking the identities of the people they are dealing with. They need to look at the individual’s driver’s license and birth certificates to confirm their identity, but when this doesn’t occur it impacts further down the chain,” he says.
“It’s happened many times, the person will start off with non-existent names and then run out of names and can’t think of any news ones, so they turn to the ones they know. Using friends and families names certainly isn’t unusual,” he says.
Warfield says financial advisory businesses have a responsibility when hiring new people to ensure they are responsible and have a clean compliance record.
“When you have a new advisor coming on, businesses need to make sure they’re doing adequate background checking on them. They do not necessarily have to be employees, it could be a third party who is aligned with them.
“They need to pass the internal controls of the company, like a smell test, and question if everything seems right. Businesses should build into their IT systems a range of data analytics so it picks up things which are outside the normal range and flags it as something to look into in more detail,” he says.
Despite already banning Vyas permanently, ASIC is continuing its investigation into his conduct.
Since January 1, 2013, ASIC has banned 11 people from the financial services industry and six of these bannings have been permanent.
Warfield says when a life-time ban is given, there is “significant evidence of ongoing fraud which has been systematic”.