ASIC ends 2021 with disciplinary blitz
The Australian Securities and Investments Commission (ASIC) ended 2021 with a raft of fines, bannings, licence cancellations, and a bankruptcy notice.
Former MFS CEO bankrupt
Michael Christodoulou King, former chief executive of MFS Ltd, was bankrupted after failing to pay a penalty order of $300,000 related to the misappropriation of funds from the Premium Income fund.
In 2016, it was found that he, and four other individuals, committed 217 breaches of the Corporations Act regarding the misappropriation of funds. While he appealed the case, he was unsuccessful and the penalty order remained in place.
Justice Kylie Downes said the bankruptcy was decided based on the fact he had provable debts in excess of $177 million and no ability to pay them and that there was nothing inappropriate in ASIC seeking bankruptcy against an insolvent debtor.
Mayfair 101 fine
The four companies in the Mayfair 101 Group have been ordered by the Federal Court to pay a $30 million fine for misleading advertising regarding two investment products.
It was found the Mayfair products were significantly higher risk than represented in their advertising, investors were at risk of default and may not receive their principal investment back in full.
This consisted of $10 million to Mayfair Wealth Partners, $8 million to M101 Holdings, $8 million to M101 Nominees (in liquidation) and $4 million to Online Investments and was more than double the original ASIC penalty of $12 million.
ASIC deputy chair, Sarah Court, said: “This penalty makes clear that firms must do the right thing by their investors, irrespective of whether they are wholesale or retail investors. Failing to accurately advertise financial products can result in significant penalties for firms”.
James Mawhinney was director of all four companies and Justice Anderson said he had shown a lack of remorse for the affected investors.
Mayfair’s response
Responding to the fine, Mayfair 101 said it would be appealing the decision and that the fine was a “questionable decision” which it hoped would be overturned.
It said Mayfair had sought formal legal advice on its promotional materials, that the provisional liquidator had made a critical error in assessing the scheme’s solvency and that ASIC had failed to obtain a legal review of the security structure.
Mawhinney said: ““It is another questionable court decision which we intend on having overturned. It is no surprise the court has stood by its original findings. The case on whether we made misleading representations in our advertising was undefended as ASIC had frozen our business activities, making it unfeasible to defend.
“I have instructed Roberts Gray Lawyers to prepare a Notice of Appeal as our prospects of appeal are strong. I look forward to having both cases heard by the Full Court, along with the appeal of my 20-year ban, in May 2022.”
Adviser banning
Sydney-based financial adviser Christopher Betali was banned from providing financial services for two years after failing to provide financial advice in the best interests of his clients.
Betali, who had worked at HNW Planning since September 2015, was found to have made recommendations which did not accord with his clients’ risk profile, gave non-compliant Statements of Advice and failed to keep adequate records.
Prior to joining HNW Planning, Betali was an authorised representative at Count.
Licence cancellation
ASIC cancelled the Australian financial services licence of financial services provider, United Wealth Group, from 24 November for failing to ensure its services were provided efficiently, honestly and fairly.
It found the Tweed Heads firm was issuing incorrect Statements of Advice by supplying incorrect administration fees, failing to disclose the association with a product provider and not disclosing the risk of a product recommendation.
Its licence would remain in effect for 12 months, from 24 November 2021, to allow it to maintain membership of the Australian Financial Complaints Authority and its obligation to hold professional indemnity insurance cover.
Within this, directors James Furnell and Adrian Summers were banned from providing any financial services for seven and five years respectively.
ASIC found both directors failed to disclose the risks associated with an investment product and ASIC believed they were inadequately trained to provide one or more financial services.
AUTHOR
Laura Dew
Recommended for you
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
Morningstar has made two business development appointments to drive the growth strategy of its financial advice software, AdviserLogic.
