ASIC Enforcement Wrap: November 2024

Key November Takeaways:

• ASIC’s civil proceeding against Paul Ryan, director of Dixon Advisory, were dismissed, demonstrating the importance of reasonably relying on advice from professional advisors in good faith. The Federal Court was also critical on ASIC’s use of concise statements in complex cases.
• The Financial Services and Credit Panel imposed the strongest sanction yet on poor recordkeeping by a financial advisor, suspending Ian Reid’s registration as a financial advisor for three months.
• ASIC prevented another Northern Territories clothing shop, Indy-C, from offering Centrepay credit arrangements, in continued efforts to prevent vulnerable First Nations customers from financial risk

Spotlight– Claims Delayed is Claims Denied

ASIC has commenced proceedings against the Construction and Building Unions Superannuation Fund (Cbus) alleging systemic claims handling failures.

This enforcement action sits squarely within ASIC’s strategic priorities as set out in its corporate plan for 2024-2025.

For context, ASIC alleges that more than 10,000 members of Cbus had to wait more than 90 days for their claims on death benefits and total and permanent disability payments to be processed.

In announcing the proceedings, ASIC noted that “Delays in claimsprocessing….cause real harm to families who may be relying on the payments to meet critical expenses”. Even Cbus itself estimates that the financial loss from the delays alone was $20 million to the affected members and claimants, or approximately $2,000 per member.

This highlights ASIC’s expectation that that superannuation trustees firms will not only make decisions for the benefit of their members and customers, but also do so within a reasonable time – meeting the general obligations under s912A(1)(a) to do all things to ensure financial services are provided not only honestly and fairly, but also efficiently.

November in Summary – Enforcement Actions and Outcomes

Civil Action:

Civil Proceedings Commenced

ASIC commenced two civil penalty proceedings in the Federal Court:

• ASIC commenced civil penalty proceedings against United Super Pty Ltd, the trustee of Construction and Building Unions Superannuation Fund (CBUS). ASIC alleges that between September 2022 and November 2024, CBUS failed to act efficiently, honestly, and fairly in handling claims for death benefits and total and permanent disability (TPD) insurance. More than 10,000 claimants had their claims taking more than 90 days to be processed. ASIC further alleges that CBUS failed to report these issues to ASIC within 30 days of becoming aware of them, and that Cbus failed to take reasonable steps to ensure that their reports of these contraventions were not materially misleading.
• ASIC commenced proceedings in the Federal Court against National Australia Bank (NAB) for financial hardship misconduct. ASIC alleges that between 2018 and 2023, NAB and its subsidiary AFSH Nominees Pty Ltd did not respond to 345 hardship applications within the required 21-day timeframe. ASIC is seeking declarations, pecuniary penalties and adverse publicity orders against NAB and AFSH.

Civil Penalties

The Federal Court ordered civil penalties of $1.25 million in one case:

• The Federal Court has ordered Sasha Hopkins to pay $1.25 million in civil penalties and be disqualified for four years, in proceedings brought by ASIC. The Court also ordered that The A Team Property Group, five of the investment schemes and associated companies be wound up, and that receivers be appointed over the property of the schemes and related trusts. The Court found that Mr Hopkins and The A Team Property Group were operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL

Civil Judgments

Two judgments were delivered in ASIC civil proceedings:

• The Federal Court appointed Helen Newman and Andrew Fielding of BDO as receivers of the property of ALAMMC Developments Pty Ltd and 12 related entities. The appointment of the receivers follows the appointment of the same receivers over Mr David McWilliams (ALAMMC’s director) and his wife Ms Laura Fullarton’s personal property in October 2024. ASIC is investigating the companies and Mr McWilliams in relation to suspected provision of financial services and use of investor funds.
• The Federal Court dismissed a proceeding against Paul Ryan, a director of Dixon Advisory & Superannuation Services Pty Ltd (DASS), where ASIC alleged Mr Ryan breached his directors’ duties when he made decisions which prejudiced DASS’s ability to pay its creditors when it was approaching insolvency. Justice O’Callaghan dismissed the proceeding, because it found that Mr Ryan reasonably relied on legal advice and acted in good faith when he made those decisions. Justice O’Callaghan was also critical of the use of concise statements in complex factual or legal cases, noting that the case which opened as raising three issues ended up involving a total of sixteen issues.

Criminal Action:

Charges– Three individuals were charged:

• David Fairfull has been charged with five counts of making false and misleading statements and one count of dishonestly using his position as a director of a company to gain an advantage for himself. Mr Fairfull allegedly provided false information about the company’s revenue and income to potential investors and also used his position as a director to obtain a personal loan.
• Kristofer Ridgway has been charged with 26 counts of dishonest conduct relating to the provision of financial services. Mr Ridgway allegedly facilitated investments for clients under two schemes where he failed to disclose to those clients that he would receive substantial commission payments.
• Jye Dilin Menzies-Clifton has been charged with two counts of authorising the making of a false statement in a document lodged with ASIC. It is alleged that Mr Menzies-Clifton authorised the lodgement of a form to deregister the company which contained declarations that the company had no outstanding liabilities, and that all the members of the company agreed to the deregistration, while knowing those statements to be false.

Verdicts – One verdict was delivered in criminal proceedings:

Lyndon Allen Kingston former director and CEO of Bananacoast Community Credit Union Limited (BCU), was found guilty of dishonest conduct following a four-week trial. A jury in the Brisbane District Court found Mr Kingston guilty of two counts of dishonestly using his position with the intention of gaining an advantage and two counts of providing misleading information to the auditor of BCU.

Sentences – Two individuals were sentenced:

• Brett Paul Trevillian, director of Metal Alpha Pty Ltd, has been sentenced to three years imprisonment for forging reports. Mr Trevillian pleaded guilty to two counts of making a false document to obtain a financial advantage, being portfolio performance verification reports to potential investors about two investment products offered.
• Harry Hatch (Hatgikyriazis), former public company director, was sentenced for failing to disclose the total number of Copper Strike Limited shares he held, contrary to the Corporations Act. Mr Hatch pleaded guilty and was sentenced to six months imprisonment to be released immediately after paying a $2,000 fine on the condition that he be of good behaviour for 12 months. The Court heard that Mr Hatch, as a director of Copper Strike, authorised the release of substantial holding notices and annual reports that were materially misleading.

Administrative Action:

Licence Cancellation/Suspension

Two companies and individuals had their AFS or Credit licence suspended or cancelled:

• DOD Bookkeeping Pty Ltd (in liquidation) had its AFS licence cancelled by ASIC following a payment by the Compensation Scheme of Last Resort (CSLR). DOD failed to make a payment of $64,860.05 to a claimant following a determination by AFCA. Subsequently, ASIC cancelled DOD’s AFS licence.
• RPD Group Advice Pty Ltd (RPD Group) had its AFS licence cancelled by ASIC following a payment of compensation by the CLSR. RPD Group failed to make a payment of $62,421.00 to a claimant following a determination by AFCA. Subsequently, ASIC cancelled RPD Group’s AFS licence.

‍Director Disqualifications

ASIC disqualified one individual from managing corporations:

• Mary Asha Makeny of Liverpool, NSW has been disqualified as a director from managing corporations for five years following her involvement in the failure of three companies in the security industry. The three companies owed a combined total of $1,069,095 to unsecured creditors, including the Australian Taxation Office.

Stop Orders

ASIC issued one stop order:

• ASIC made a final stop order preventing Indy-C-Fashion Accessories Pty Ltd (Indy-C) from offering Centrepay credit arrangements to consumers in its store in Katherine. An ASIC Delegate determined that Indy-C initially offered its credit arrangements without making a Target Market Determination (TMD). When Indy-C did make a TMD, the ASIC Delegate determined that if the credit arrangement was distributed in the way it suggested, it would not be likely that a consumer receiving the credit arrangement was in the target market.

Infringement Notice

ASIC issued one infringement notice:

• Optix Australasia Pty Ltd has paid $187,000 in compliance with an infringement notice issued by ASIC. ASIC has reasonable grounds to believe that Optix, a small proprietary company controlled by South African company KAP Limited, failed to lodge its financial reports for the year end 30 June 2023 within the period noted under the Corporations Act.

Financial Services and Credit Panel Outcome

• Ian Reid had his financial adviser registration suspended by the Financial Services and Credit Panel (FSCP), for three months from 21 November 2024. The FSCP found Mr Reid had failed to comply with his obligations when providing advice to three clients. Mr Reid used records of advice (ROA) that relied on statements of advice (SOA) that had been given to the clients up to seven years ago. This is the strictest sanction imposed by the FSCP since its inception for poor recordkeeping.

Other actions:

• ASIC has taken action in the Federal Court to wind up 95 companies. Catherine Conneely and Thomas Birch of Cor Cordis have been appointed as joint and several provisional liquidators of the companies. ASIC is concerned that some of the companies are the subject of complaints, appear to be associated with websites facilitating scam activity, and generally lack confidence in the conduct and management of the affairs of the companies.

If any of the above is relevant to you or you want to know more, please feel free to get in touch.

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.