Two financial advisers have been found guilty of breaching the ethics code of their professional body and ordered to pay legal costs after advising their clients to plunge thousands into failed finance company Bridgecorp.
The Institute of Financial Advisers yesterday censured and publicly named Bruce Ryder and Craig Lunn after two separate disciplinary hearings dating back to complaints made at the end of 2007.
Ryder pleaded guilty to four charges and was ordered to pay $30,000 to the institute after he advised a farming couple with young children to invest $100,000 in Bridgecorp debentures.
The couple had sold their house in Milton, south of Dunedin, and came to Ryder in 2006 for advice on where to invest the money until they were ready to buy another house.
Ryder, who knew the couple as their insurance adviser, told them to place it all with Bridgecorp.
But the finance company collapsed in July 2007 owing about $460 million to 14,500 investors.
The institute's disciplinary committee found Ryder breached its code of ethics in relation to professionalism and appropriateness of advice. He also gave tax advice when he was not qualified to.
The committee found the breaches to be at the upper range of the scale of seriousness and said Ryder had shown few signs of contrition.
But it took into account a confidential settlement agreement reached with the couple.
Lunn pleaded guilty to the same four charges after he recommended a client invest $25,000 in Pacific Retail Finance, $25,000 in Bridgecorp and $25,000 in Provincial Finance.
They invested $15,000 in Pacific and $30,000 each in Bridgecorp and Provincial.
The committee found Lunn failed to provide appropriate recommendations given the investors wished to preserve their capital and said the investments should have been more diversified.
He also failed to provide his clients with a comprehensive financial plan or to ensure they had a clear understanding of the risks involved in investing in Bridgecorp and Provincial.
Lunn was ordered to pay $37,000 to cover the costs of the hearing.
Institute of Financial Advisers chief executive David Hutton said the two cases were the ninth and 10th in a run of disciplinary cases held in the past six months.
But this was the first time the committee had named the advisers and fined them at such a high level.
"These two particular people were operating outside of their area of expertise," Hutton said.
Both were insurance advisers who had decided to give investment advice without being qualified in that area.
The two advisers would be allowed to remain as members of the body as long as they practised within their area of expertise.
Hutton said another five cases involving two advisers had been referred to the committee.
Advisers fined over finance collapse
David Hutton. Photo / Supplied
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