The Federal Court has banned James Mawhinney from promoting and raising funds through financial products for 20 years. It is one of the heftiest bans of recent times.
The judgment from Justice Anderson is the latest in proceedings brought by ASIC in August 2020 in relation to the failed Mayfair 101 Group. Mawhinney was a director of a number of failed companies in the group.
The Mayfair 101 Group offered investments in several financial products including unsecured debentures.
The Federal Court had earlier found that companies in the group made false, misleading or deceptive claims that:
- the debenture products and their risks were comparable to bank term deposits;
- the principal investment would be repaid in full on maturity; and
- the debenture products were specifically designed for investors seeking certainty and confidence in their investments and therefore carried no risk of default.
The Court found that Mr Mawhinney was the only “directing mind and will” of the companies and, in fact, they were his “corporate alter egos”. He was therefore involved in, and liable for, the companies’ misconduct.
In one of the most strongly-worded civil judgments obtained by ASIC against an individual, the Court described Mr Mawhinney in the following terms:
- “serious, incompetent and reckless and displaying a propensity for conduct in disregard of the requirements of financial services laws;”
- “reprehensible conduct which demonstrates a complete disregard for financial services laws and, as a consequence, places the public at great risk of financial loss should Mr Mawhinney not be restrained by the form of injunction sought by ASIC;” and
- conduct that entailed “inherently problematic, risky and fatally flawed” investment schemes.
The Court also found that Mr Mawhinney had expressed no contrition or remorse for the very significant loss of investors’ funds, which are estimated at $211million.
The 20-year ban is one of the highest of its type ever imposed on an individual, reflecting the serious and reckless nature of his contraventions. However, it is less than what ASIC was seeking, which was a permanent ban.
In deciding not to impose a permanent ban, or a ban of 25 years or more, Justice Anderson noted the lack of three characteristics which are usually present for such bans:
- Mr Mawhinney had not been the subject of a criminal conviction (although we note ASIC is pursuing a criminal investigation);
- The evidence did not support a finding that Mr Mawhinney had benefited personally from his wrongdoing (although there were concerns as to what became of the funds invested in Mr Mawhinney’s various failed investment schemes and that that he may stand to benefit personally from them); and
- ASIC did not allege that Mr Mawhinney engaged in conscious dishonesty or an intent to defraud (rather, as outlined above, it was “serious, incompetent and reckless”).
While perhaps an outlier, the judgment confirms the considerations in imposing a ban of this type, and the high threshold for a permanent ban.
ASIC’s media release can be accessed here.