ASIC Enforcement wrap: April 2022

In a busy April 2022, ASIC announced many enforcement actions, including administrative bannings or disqualifications, hefty civil penalties and compensation orders, and criminal consequences including prison terms.

We analysed these to provide insight into ASIC’s recent activities and areas of focus.

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The key takeaways

‍- Civil Action – 6 companies and 1 individual were subjected to infringement notices, travel restraint orders, fines, compensation and other civil action for misconduct including mis-selling insurance, providing false and misleading documents in loan applications, false statements connected to foreign exchange trading accounts, and misleading statements to super fund members.

Most notably, in a very costly month for Westpac, in 7 separate Federal Court matters ASIC obtained total fines of $114.5 million against the Big Four banking group.

- Administrative Action – 27 individuals and a company were banned, disqualified or had their licences cancelled for a range of misconduct.  This included:

• illegal “phoenix” activity; 
• auditors’ lack of independence, fitness and propriety;
• lacking honesty and integrity;
• using their position for personal gain; and 
• involvement in multiple failed companies.

- Criminal Action:

• 3 individuals and 1 company received criminal penalties, including terms of imprisonment, for dishonesty offences such as fraud.  These actions involved various industries and services, including cryptocurrency-backed loans, resources and mining, and debt management.
• in addition, 2 individuals received criminal sanctions for making false statements in a form lodged with ASIC to deregister a company and in an annual credit licence compliance certificate.

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April’s enforcement activity demonstrates continued ASIC presence across all three areas of civil, administrative and criminal action.  There were significant civil outcomes against Westpac Group entities and the commencement of civil penalty proceedings against Macquarie Bank.  

At the other end of the spectrum, a number of smaller entities and individuals were subject to administrative action, demonstrating the willingness of ASIC to use all enforcement tools at its disposal.  

A notable case was that of Mark Babbage, who made headlines for the wrong reasons when he travelled to Perth to watch Melbourne Football Club break its premiership drought and landed himself in a lot of trouble.  The fallout continues, with ASIC banning him from providing financial services for 10 years based on those events.

Financial penalties, compensation and other civil action

The following 5 companies (or corporate groups) and one individual were subjected to infringement notices, fines, compensation orders and other civil action:

• In 7 separate matters in the Federal Court, the Westpac banking group was fined $114.5 million for widespread compliance failures across multiple business, including its banking, superannuation, wealth management and insurance brands.  This included:

• $40 million fine for charging advice fees to over 11,800 deceased customers;
• $20 million fine for allowing 21,000 deregistered company accounts to remain open and being charged fees; and
• $20 million fine for BT Funds Management regarding insurance in superannuation.

• ASIC brought civil penalty proceedings against Macquarie Bank for alleged failures to properly monitor third party withdrawals from customer accounts. 
• ASIC brought civil penalty proceedings against Rent4Keeps and Layaway Depot for allegedly operating business models designed to avoid consumer protections for financially vulnerable consumers, including maximum interest rates under the Credit Act. 
• ASIC obtained interim travel restraint orders against Mark Francis McCabe, who is alleged to have falsely promised access to foreign exchange trading account containing large amounts of funds. 
• Maritime Super paid $26,640 to comply with 2 infringement notices issued by ASIC, for alleged misleading statements to members about its investment partnership with Hostplus. 

Bannings, disqualifications and licence cancellations

27 individuals and one company were subject to bannings, disqualifications or licence cancellations:

• Enrico Pucci, former director of cleaning and labour hire companies, was disqualified from managing corporations for 5 years for engaging in illegal “phoenix” activity. 
• 19 auditors of Self-Managed Super Funds (SMSF) had their registrations cancelled due to for breaches of obligations including independence requirements and a lack of fitness and propriety.  
• Mark Babbage, former authorised representative, was banned for 10 years from providing financial services or engaging in credit activities.  Mr Babbage had earlier been convicted of 4 criminal charges, including gaining a benefit by fraud and a failure to comply with a direction under the Emergency Management Act 2005 (WA), after he illegally entered Western Australia to attend the 2021 AFL Grand Final.  ASIC was therefore satisfied that he lacked the honesty and integrity to participate in the financial services and credit industries.  
• Dominique Grubisa, CEO and director of financial services training companies, was banned for 4 years from engaging in financial services or credit activities, due to falsely representing that she and her businesses were licenced by ASIC.  
• Rodney Peter Maher, former credit representative, was banned for 6 years from engaging in credit activities, due to recklessly providing documents in support of home loan applications that were false or materially misleading.  
• Dixon Advisory had its Australian Financial Services licence (AFSL) cancelled, following the appointment of joint administrators to the company.  ASIC’s civil penalty proceedings brought against Dixon Advisory for alleged conflicts, best interest duty failures and inappropriate advice, are currently stayed.  
• Tom Butler, former director of construction and trade companies, was disqualified from managing companies for 4.5 years due to his involvement in the failure of 3 such companies. 
• Toufic Chidiac, former director of companies that operated restaurants, was disqualified from managing corporations for 2 years due to his involvement in the failure of 8 such companies. 
• James O’Donahue, former director of 23 building and construction companies, was disqualified from managing corporations for 2 years due to his involvement in the failure of those companies. 
• Simon Maurice Pitard, former director of building and construction companies, was disqualified for 3.5 years due to his involvement in the failure of those companies. 

Criminal consequences for fraud and other dishonesty

The following 3 individuals and a company were criminally charged or penalised for dishonesty offences, including fraud, following ASIC investigations:

• Helio Lending Pty Ltd, a lender offering cryptocurrency-backed loans to consumers, was charged with falsely claiming it held an Australian credit licence. 
• Anthony John Dunlop, former director of previously ASX-listed Capital Mining, was charged with four counts of dishonestly using his position as a director when he co-authorised payments to related companies that caused a financial detriment to Capital Mining. 
• Graham Rothesay Swan, former auditor of Big Un Limited, was charged with making a false or misleading statement in his independent audit report. 
• David Gregory Murphy, aka Dr/Professor David Murphy, former operator of Debt Wipeout, was charged with engaging in dishonest conduct and making false or misleading statements, including falsely claiming that he could discharge consumers’ existing debts in return for an up-front payment of a small percentage of the debt. 

Criminal consequences for providing false information to ASIC

ASIC took action against the following 2 individuals for false statements in forms lodged with ASIC:

• Salam Zaki, former director of Professional Project Services Pty Ltd, was found not guilty of making a false or misleading statement in a form lodged with ASIC to deregister the company.   
• Shiwei (Darren) He, a former mortgage broker, was sentenced and released without proceeding to conviction after entering into a $5000 recognizance to be of good behaviour for two years.  Mr He had falsely stated in a credit licence annual compliance certificate that none of the “fit and proper” people under his credit licence had had their accreditation suspended or cancelled by a lender. 

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Anthony Jensen, Senior Associate

Dan Mackay, Managing Director

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The contents of this article do not constitute legal advice and it is not intended to be a substitute for legal advice and should not be relied upon as such.  It is designed and intended as general information in summary form, current at the time of publication, for general informational purposes only.  You should seek legal advice or other professional advice in relation to any particular legal matters you or your organisation may have.

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