July 14, 2024
What led an adviser to falsify his exam result?

Details have been shared as to why a financial adviser took the decision to falsify his financial adviser exam result as well as what led the Administrative Appeals Tribunal (AAT) to vary his permanent ban.

Todd Karamian was permanently banned in March 2023 for falsifying the result of his financial adviser exam from a fail to a pass. However, in a successful appeal to the AAT, this was varied to a seven-year ban instead.

He sat the exam in November 2021, having already rescheduled it three times. This was the final sitting he could take in order to maintain his status as a relevant provider on 1 January 2022.

When he received his result, he detailed how he “sat in shock” and realised there were no further sittings available to retake the exam. He then manually changed it and continued to provide financial advice at licensee Bluepoint, where he had worked since 2003, to 11 clients when he was not a relevant provider. 

“On 13 November 2021, the applicant sat for the exam for the first and only time. On 10 December 2021, he became aware that he had failed the exam when he received a two-page statement of results document after being notified by email that the results were accessible. The applicant then downloaded the exam statement and typed the word ‘Pass’ over the word ‘Fail’ on page 1 of that statement.

“He then emailed to Tony Bates, who was also a responsible manager of Bluepoint, a screenshot of page 1 of the falsified exam statement. Mr Bates updated the Financial Advisers Register kept by ASIC to reflect a ‘Pass’ result for the applicant.”

ASIC informed Bluepoint in May 2022 that Karamian’s authorisation had ceased on the FAR, but the licensee sent the regulator his falsified exam statement. On 24 August 2022, ASIC announced Karamian was being put under investigation and he confessed his misdeeds to Bates five days later.

“When in May ASIC requested proof of my results, I knew that I was in trouble. I wanted to be honest with you, but I just couldn’t bring myself to disclosing it all to you. I was deeply embarrassed and was afraid of how you would react. I was also afraid how this could impact the business and our staff,” he wrote to his responsible manager.

In a subsequent letter on the same day, he followed up: “I can’t help but feel the system failed me. FASEA didn’t need to be that way. Every human has a breaking point, and I broke.”

Following this, he did not advise any further retail clients but continued to advise wholesale clients until 9 March 2023; Bluepoint filed a breach report with ASIC which described his conduct as serious fraud.

ASIC banning

ASIC had argued that the original permanent ban was necessary in order to avoid sending a “problematic message” to the industry and consumers that would tarnish its credibility and that Karamian did not take the opportunity to come clean about his actions which were made deliberately over nine months between 10 December 2021 and 29 August 2022. 

He also placed his licensee Bluepoint in a potential breach of financial services law as they have obligations to ensure their advisers are fit and proper persons.

“According to ASIC, while the applicant has great regret for his actions, he has on a number of occasions downplayed the seriousness of his conduct in a manner which indicated a lack of insight and undermines his expressions of remorse. 

“ASIC submitted that what emerged from his cross-examination was the overwhelming sense that the decisions he made were not spur of the moment decisions but detailed and far more involved than they were initially presented to be. His decisions were said to be not just one or two snap decisions made in a panic, but a series of deliberate and active choices made over nine months.”

The applicant suggested a banning order of around three years and argued he had been under personal stress at the time, as well as provided character witnesses to testify to his honesty and integrity.

AAT verdict

In the AAT orders, Justice Kyrou said the decision to vary the ban had been taken based on their expert evidence about Karamian’s mental health, a prior good record over many years, and extensive favourable character evidence. He also outlined that the applicant was remorseful, took responsibility for the action, and there was a low risk of him doing the same action again.

Nor was there any financial loss caused to his clients or any intention to defraud or disadvantage them.

“The main features of this case which have led me to conclude that a banning period of seven years is the correct or preferable decision are not confined to the degree of the applicant’s dishonesty or the length of time over which it subsisted.

“A banning order of that length is necessary to achieve the purposes of such an order set out in the applicable legal principles and the objectives of the Corporations Act and the ASIC Act. A banning order of that length – and of the scope already discussed – is necessary to protect the community and would be neither disproportionate nor impermissibly punitive in character.”

However, he did emphasise that there was “material deficiency in his insight, an incomplete appreciation of the conflict of interest and breach of trust that his conduct involved, and an unsatisfactory level of professional ethics knowledge”.

Regarding the applicant’s claim that the ban would cause “financial and emotional distress”, the judge told him to adjust to a less excessive lifestyle. He was identified as a “man of significant wealth” who owned two houses and multiple luxury cars.

“The applicant’s family will experience financial and emotional pressures only if they wish to maintain their pre-banning order financial position and lifestyle without the need to sell any assets or change any aspect of their living and personal arrangements. 

“He would be able to substantially reduce his family’s debts by appropriate financial and lifestyle adjustments, such as selling part or all of his shareholding in Bluepoint, selling the apartment that is leased to his parents-in-law, and driving less expensive vehicles. I accept that such adjustments will be difficult emotionally for him and his family, and will cause some dislocation or upheaval.”

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