16-327MR Former financial adviser charged over fraud

Former financial adviser, Gabriel Nakhl, appeared in the Local Court of New South Wales yesterday on 19 charges brought by ASIC of engaging in dishonest conduct with investor funds.

ASIC alleges that Mr Nakhl, of Illawong, NSW knowingly engaged in dishonest conduct in relation to twelve investors by:

• misleading them about the investments he would make on their behalf and on behalf of their self-managed superannuation funds, including how he would invest their money and the risks and returns of the investments he recommended;
• using money provided to him by investors, including money from investors' self-managed superannuation funds, for purposes other than those he said he would use it for;
• telling investors that their investments were performing well when this was not the case; and
• attempting to cover-up and conceal his wrongdoing.

The alleged conduct occurred between March 2009 and March 2011 while Mr Nakhl was an authorised representative of Australian Financial Services Limited (in liquidation) and from about March 2011 to about September 2013 while he was the sole director of SydFA Pty Ltd (in liquidation).

The charges were brought against Mr Nakhl following an ASIC investigation.

Mr Nakhl did not enter a plea but asked for an adjournment to obtain legal advice.

The matter was stood over until 11 October 2016.

The Commonwealth Director of Public Prosecutions is prosecuting the matter.

Background

Mr Nakhl has been charged with 19 counts under section 1041G of theCorporations Act 2001 (Cth).

In February 2013, ASIC obtained court orders against Mr Nakhl preventing him from disposing of, dealing with or otherwise diminishing certain assets. See 13-023MR for more details.

In September 2013, Mr Nakhl became a bankrupt and placed SydFA Pty Ltd into liquidation.

In November 2013, ASIC accepted an enforceable undertaking from Mr Nakhl that permanently restricts him from providing financial services and restricts him from managing a corporation for 15 years. See 13-313MR for more details.

16-326MR ASIC acts to freeze sale of land proceeds in excess of $100 million pending disclosure to investors

Following an application made by ASIC on 19 August 2016, the Federal Court of Australia has made orders limiting the ability of Aviation 3030 Pty Ltd (Aviation) to deal with the proceeds of sale of property it owns in Victoria.

The Aviation property was purchased in 2011 by Aviation, which raised funds for this purpose from around 70 shareholders and unitholders.

Aviation consented to the orders being made.

ASIC commenced its investigation into Aviation in May 2016. In the course of its investigation, ASIC became aware that: 

• in March 2016, Aviation had issued shares to companies associated with a director and a former director of Aviation, purportedly pursuant to an Aviation letter dated 4 May 2011 and an option agreement dated 18 September 2012 entered into by the then directors of Aviation ('the 2016 share issue'); 
• this resulted in a substantial dilution of the interests of investors, and an increase in the interests controlled by the directors of Aviation and their associates; 
• neither the 4 May 2011 letter nor the 18 September 2012 option agreement had been disclosed to investors prior to their investments in Aviation and the 2016 share issue had also not been disclosed to all investors; and  
• in May 2016, Aviation received an offer from a third party to purchase the Aviation property for more than $100 million and that this offer had not been disclosed to all investors. ASIC's understanding was that this property was expected to be sold within a short timeframe.

Based on these matters, ASIC was concerned that the proceeds of sale of the Aviation property would be distributed in accordance with the 2016 share issue. This was in circumstances where investors had not been provided with proper disclosure in relation to the dilution of their interests, either at the time of their investments or subsequently.   

ASIC obtained the orders to protect the interests of investors and specifically to enable them to be provided with:

• information as to the 2016 share issue (and the documents purportedly relied upon by Aviation for that purpose);
• details of the proposed sale of the Aviation property; and
• an opportunity to decide whether to obtain independent advice concerning their investments. 

As part of an agreement reached with ASIC, Aviation undertook to provide disclosure to the Investors in relation to these matters, in a form agreed to by ASIC. Aviation has advised ASIC that it has completed this process.

Developments subsequent to the orders

Aviation has advised ASIC that the offer to purchase the Aviation property has been withdrawn.

The Orders will remain in place until further order of the Federal Court. The matter returns to the Federal Court on 25 November 2016.

ASIC's investigation into Aviation is ongoing.

16-320MR AAT affirms ASIC decision to disqualify SMSF auditor

On 9 September 2016, the Administrative Appeals Tribunal (AAT) upheld ASIC's decision to disqualify Mr Abe Samuel from being an approved self-managed superannuation fund (SMSF) auditor. 　

The AAT found that Mr Samuel "plainly breached the auditor independence requirements in APES 110 (Code of Ethics for Professional Accountants). As a consequence, he contravened his professional obligations under s128F of the Superannuation Industry (Supervision) Act 1993."

The AAT was satisfied that Mr Samuel "failed to carry out or perform adequately and properly the duties of an auditor under the Act or the Regulations or as otherwise required by law; and, furthermore or alternatively, the Applicant (Mr Samuel) is not a fit and proper person to be an approved SMSF auditor for the purposes of the Act."

The AAT stated that it upheld ASIC's decision due to "the very serious and fundamental nature of the applicant’s (Mr Samuel's) deficiencies; his longstanding and ongoing failure to understand properly those deficiencies; and the clear need to uphold the integrity of the SMSF system."

ASIC Commissioner John Price noted the AAT finding, saying: "To safeguard the SMSF sector, ASIC will continue to use its power to disqualify approved SMSF auditors that don’t perform their role adequately and meet professional standards."

SMSF trustees and members can check whether their auditor is registered, or whether a person has been disqualified, by searching ASIC's SMSF auditor register at connectonline.asic.gov.au.

Background 　

Information about Mr Samuel was referred to ASIC by the Australian Taxation Office (ATO).

On 7 October 2015, ASIC made an order disqualifying Mr Samuel from being an approved SMSF auditor. Mr Samuel requested that ASIC reconsider the disqualification decision. On 23 November 2015, a delegate of ASIC confirmed the decision.

ASIC found that Mr Samuel had breached auditor independence requirements of APES 110 where he was:

• a member of a fund he audited and also the director of its corporate trustee; and
• the power of attorney holder for, and a relative of, a member of a fund he audited.

On 18 December 2015, Mr Samuel applied to the AAT for a review of the disqualification decision.

From 1 July 2013, the SIS Act required all auditors of SMSFs to be registered with ASIC. This was to ensure that all SMSF auditors at least meet the base standards of competency and expertise.

ASIC and the ATO work closely together as co-regulators of SMSF auditors. The ATO monitors SMSF auditor conduct and may refer matters to ASIC for possible action such as disqualification or suspension of their registration.

See also 15-362MR ASIC disqualifies Abe Samuel as SMSF auditor.

16-312MR ASIC permanently bans former company director in relation to fraudulent misappropriation

ASIC has permanently banned Mr Steven William Hill from engaging in credit activities and providing financial services.

An ASIC investigation found that between January 2006 and February 2007, Mr Hill, through Hill Stephens & Associates Pty Ltd and International Finance Consortium (Aust) Pty Ltd induced various investors to pay approximately $618,000 to acquire interests in a 'house and land' property development located in Queensland.

Mr Hill was found guilty of fraudulently misappropriating $281,000 of the invested funds, which were directed to company bank accounts to make payments to Mr Hill and other third parties.

On 18 April 2016, His Honour Acting Judge Garling sentenced Mr Hill to 2 years and 9 months jail for fraudulent misappropriation (refer: 16-118MR).

Following the sentencing, ASIC determined that Mr Hill should be permanently banned as he was convicted of offences involving dishonest and fraudulent conduct.

ASIC Commissioner Peter Kell said Mr Hill's misconduct was very serious.

'ASIC will ban people from the finance industry who act dishonestly and place personal interests ahead of those they service.  Mr Hill's actions exposed vulnerable members of the community to financial loss and hardship', Mr Kell said.

Mr Hill has the right to appeal to the Administrative Appeals Tribunal for review of ASIC’s decisions.

Background

ASIC investigations revealed that between January 2006 and February 2007, Mr Hill met with various investors based in New South Wales.  Describing himself as a 'financier/consultant', Mr Hill, through his company Hill Stephens & Associates Pty Ltd, told investors he would be able to provide them with investment opportunities to build their wealth towards retirement.

Mr Hill advised investors their funds would be used as 'seed capital' in a number of Queensland based property developments he was facilitating. Mr Hill advised investors that they would receive returns of between 10 - 30% per annum, however, unknown to the investors, funds paid were not invested in the property developments as originally advised by Mr Hill.

In June 2013 Mr Hill was charged with eight counts of fraudulent misappropriation (refer: 13-146MR).

In March 2015 Mr Hill was ordered to stand trial on seven counts of fraudulent misappropriation (refer: 15-050MR).

In March 2016 Mr Hill was convicted on 6 counts of fraudulent misappropriation by a Sydney District Court jury after a four-week trial. (refer: 16-072MR).

Mr Hill was found not guilty of one charge of fraudulently misappropriating $150,000.

16-318MR ASIC permanently bans former AMP financial planner Damian O'Rourke

ASIC has permanently banned Queensland financial adviser Mr Damian O'Rourke, of Brisbane, from providing financial services after an investigation found he failed to provide appropriate advice, failed to provide clients with statements of advice and borrowed significant sums of money from clients, most of which were not repaid.

Mr O'Rourke was employed as a representative of AMP Financial Planning Pty Ltd (AMP) from 1983 until 10 April 2014.

ASIC found that Mr O'Rourke had failed to comply with key requirements of the Corporations Act, in that he:

• failed to provide a statement of advice to 31 clients when he advised them to apply for income protection insurance, life insurance, trauma insurance and/or total and permanent disability insurance (insurance) as a new product, or to replace an existing insurance product;
• failed to make reasonable inquiries in relation to a client and failed to provide that client with appropriate advice when he provided that client with advice in relation to insurance and superannuation products in September 2012; and
• failed to act in the best interests of a client in relation to insurance and superannuation product advice he provided in November 2013 and failed to give priority to that client's best interests over his own.

ASIC also found reason to believe that Mr O'Rourke was not of good fame and character as he borrowed over $2 million from clients and others in the circumstances where:

• only approximately 10% of the total amount loaned was repaid;
• he did not ensure clients were provided with independent legal and financial advice;
• he did not document all of the loans; and
• he sought loans from clients when he knew he had not repaid earlier loans.

ASIC Deputy Chair Peter Kell said, 'Financial advisers must act in the best interests of their clients. ASIC will take action against financial advisers who do not comply with their obligations.'

Mr O'Rourke has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC's decision.

Background

This outcome is a result of ASIC's Wealth Management Project. The Wealth Management Project was established in October 2014 with the objective of lifting standards by major financial advice providers. The Wealth Management Project focuses on the conduct of the largest financial advice firms (NAB, Westpac, CBA, ANZ, Macquarie and AMP).

ASIC's work in the Wealth Management Project covers a number of areas including:

1. working with the largest financial advice firms to address the identification and remediation of non-compliant advice;
2. seeking regulatory outcomes, where appropriate, against licensees and advisers. For example, as part of its Wealth Management Project, ASIC has banned the following advisers from the financial services industry, in addition to Mr O'Rourke:

• Rommel Panganiban (16-309MR)
• Anthony Jason Sourris (16-270MR)
• Sarah Kate Gardner (16-269MR)
• Nicholas Kerr (16-260MR)
• Craig Scott Miller (16-239MR)
• Wayne Meadth (16-188MR)
• Hardik Bhimani (refer: 16-124MR)
• Gerard McCormack (refer: 16-059MR)
• Shane Thompson (refer:16-022MR)
• Ben Rickman (refer:16-006MR)
• Ben Cheung (refer: 16-004MR)
• Mark Tidbury (refer: 15-383MR)
• Amanda Ritchie (refer: 15-294MR)
• Stuart Murray Jamieson (refer:15-288MR)
• Sharnie Kent (refer: 15-286MR)
• Alfie Chong (refer: 15-259MR)
• Martin Hodgetts (refer: 15-218MR)
• Shawn Hickman (refer: 15-213MR)
• Brett O'Malley (refer: 15-121MR)
• Brian Farber (refer: 15-178MR), and
• Rebecca Locksley (refer: 15-070MR).

16-309MR ASIC permanently bans former AMP financial planner

ASIC has permanently banned Mr Rommel Panganiban, of Bella Vista, New South Wales, from providing financial services after an ASIC surveillance found that he failed to act in his clients' best interests or have a reasonable basis for advice, and that he had prioritised his own interests over that of his clients.

Mr Panganiban was an authorised representative of AMP Financial Planning Pty Ltd between 19 March 2010 and 12 September 2014.  

Between 4 February 2011 and 31 July 2014, Mr Panganiban advised 49 clients who held risk insurance through their AMP superannuation fund to cease their existing AMP insurance policies and replace them with new AMP insurance policies. He did this without considering whether this was in the best interests of his clients and without advising his clients that he was able to simply transfer the insurance policies.

By ceasing and replacing the insurance policies, rather than transferring them, the full rate of commission became payable to AMP Financial Planning Pty Ltd.  Mr Panganiban's remuneration was positively influenced by the upfront commissions he generated as a result of his advice.

As a result of replacing rather than transferring the clients' policies, Mr Panganiban's clients were exposed to unnecessary consequences including gaps in cover and changes in definitions and policy terms and they risked policy exclusions and loadings. It also unnecessarily restarted the non-disclosure period that allows insurers to avoid policies within the first three years of inception for inadvertent non-disclosure.

The repetitive nature of Mr Panganiban's conduct, against the best interests of his clients and motivated by greed, led to a finding by ASIC that Mr Panganiban was not of good fame and character.

AMP Financial Planning Pty Ltd alerted ASIC to Mr Panganiban's behaviour on 3 October 2014, and has written to his clients offering to review their advice.

Mr Panganiban was a representative of Lionsgate Financial Group Pty Ltd from 29 September 2014 until 3 August 2016. ASIC will require both AMP Financial Planning Pty Ltd and Lionsgate Financial Group Pty Ltd to notify Mr Panganiban's clients of his banning.

Mr Panganiban has appealed to the Administrative Appeals Tribunal (AAT) for a review of ASIC's decision.

Background

After the ASIC Delegate conducted the hearing of this matter pursuant to the Hearing Notice, Mr Panganiban filed an application in the Federal Court seeking orders that ASIC provide him with additional material (namely, client files) and that ASIC be restrained from making a decision in relation to the Hearing Notice. In his application, Mr Panganiban claimed that by failing to provide him with the client files, ASIC had denied him procedural fairness.

Mr Panganiban's application was heard on 21 April 2016. On 13 May 2016, his Honour Justice Bromwich delivered his judgment, in which he dismissed the application and awarded costs to ASIC.

In his judgment, his Honour Justice Bromwich confirmed that it is for ASIC to determine the matters and material on which it proposes to rely in making a banning decision, and that it is those matters and material which the rules of natural justice require to be disclosed to the banning candidate (refer: 16-160MR)

On 9 September 2016, an application in the AAT by Mr Panganiban for a stay of the ASIC Delegate's decision and confidentiality orders was dismissed. Mr Panganiban's appeal to the AAT for review of ASIC's decision will be heard on a date to be fixed.

Wealth Management Project

This outcome is a result of ASIC's Wealth Management Project. The Wealth Management Project was established in October 2014 with the objective of lifting standards by major financial advice providers. The Wealth Management Project focuses on the conduct of the largest financial advice firms (NAB, Westpac, CBA, ANZ, AMP and Macquarie).

ASIC's work in the Wealth Management Project covers a number of areas including:

1. Working with the largest financial advice firms to address the identification and remediation of non-compliant advice;
2. Seeking regulatory outcomes when appropriate against Licensees and advisers.

As part of its Wealth Management Project, ASIC has banned the following advisers from the financial services industry, in addition to Mr Panganiban:

•         Anthony Jason Sourris (16-270MR)
•         Sarah Kate Gardner (16-269MR)
•         Nicholas Kerr (16-260MR)
•         Craig Scott Miller (16-239MR)
•         Wayne Meadth (16-188MR)
•         Hardik Bhimani (refer: 16-124MR)
•         Gerard McCormack (refer: 16-059MR)
•         Shane Thompson (refer:16-022MR)
•         Ben Rickman (refer:16-006MR)
•         Ben Cheung (refer: 16-004MR)
•         Mark Tidbury (refer: 15-383MR)
•         Amanda Ritchie (refer: 15-294MR)
•         Stuart Murray Jamieson (refer:15-288MR)
•         Sharnie Kent (refer: 15-286MR)
•         Alfie Chong (refer: 15-259MR)
•         Martin Hodgetts (refer: 15-218MR)
•         Shawn Hickman (refer: 15-213MR)
•         Brett O'Malley (refer: 15-121MR)
•         Brian Farber (refer: 15-178MR)
•         Rebecca Locksley (refer: 15-070MR), and
•         Craig Miller (refer 16-239MR)

16-306MR Sunbury man sentenced to 6 years and 3 months imprisonment for fraud

The County Court of Victoria has convicted and sentenced Mr Barry Patrick to 6 years and 3 months imprisonment, after he pleaded guilty to six charges following an ASIC investigation.  Mr Patrick, 73, of Sunbury, Victoria, will be eligible for parole after serving 3 years and 9 months.

Mr Patrick pleaded guilty to:

• 3 charges of obtaining property by deception,
• 2 charges of obtaining a financial advantage by deception, and
• 1 charge of carrying on a financial services business without a license.  

Mr Patrick nominated investors to be directors of a number of companies formed to purchase properties on the outskirts of Melbourne for development. Those companies were Wrestway Property Development Pty Ltd, Exclusive Property Consultants Pty Ltd, Compendium Holdings Pty Ltd and Integrated Consolidated Holdings Pty Ltd.

To obtain funds for the property development projects, Mr Patrick persuaded investors to refinance their homes and/or establish self-managed superannuation funds (SMSF) and then invest their superannuation in the developments.

Between 2007 and 2010, Mr Patrick illegally obtained more than $600,000 from 14 retail investors to fund the property developments because of financial advice provided by him when he was not authorised to do so. 

The funds raised by Mr Patrick were not used to develop the properties but were instead used to pay interest payments to past and existing investors and to meet repayments on loans, as well as his own personal use such as artwork and jewellery.

In sentencing Mr Patrick, His Honour Judge Gavan Meredith noted that Mr. Patrick had shown little remorse for leaving his victims lives in ruin and that the offending was protracted, calculated and at times brazen.

Commissioner Peter Kell welcomed the County Court sentencing. "The conduct of Mr Patrick exposed vulnerable members of the community to severe financial loss and hardship. ASIC will not hesitate to prosecute this type of deceptive and harmful conduct."

The Commonwealth Director of Public Prosecutions prosecuted the matter.

Background

Mr Patrick was charged in July 2014 (14-166 MR) and pleaded guilty in July 2016 (16-138MR)

Mr Patrick had previously been convicted of operating a financial services business without a licence (10-257AD) as well as failing to keep proper books and records as a director of companies that went into liquidation (10-55AD).

16-305MR ASIC accepts enforceable undertaking to address compliance failures of Perth financial advice firm

ASIC has accepted an enforceable undertaking (EU) from Neo Financial Solutions Pty Ltd (Neo) following concerns about the adequacy and application of Neo’s risk management and compliance frameworks.

Under the EU, Neo will engage an independent expert to assess, report and make recommendations about Neo’s risk management and compliance frameworks.

NEO is based in Perth, Western Australia with approximately 160 individual and corporate authorised representatives.

The EU follows an ASIC surveillance of Neo's’s business. ASIC's surveillance focussed on Neo’s general obligations as an Australian financial services (AFS) licensee and included a review of its compliance and risk management framework including its programs, policies, procedures and controls. ASIC’s surveillance also tested financial product advice provided to retail clients and the internal advice audits and remediation reviews conducted by Neo.

ASIC's advice concerns included failing to address important client objectives, not making reasonable enquiries to determine all relevant client circumstances and not fully considering the consequences when replacing existing financial products.

ASIC's surveillance indicated that Neo failed to employ appropriate risk management and compliance frameworks having regard to the nature, size and complexity of its business, which had grown considerably since its inception. In particular, in ASIC's view, Neo had:

• inadequate resources to carry out monitoring and supervision;
• inadequate identification, recording and assessment of risks;
• audit and remediation programs which were not timely and effective in identifying and remediating advice conduct and deficiencies;
• vetting policies and procedures which were not consistently applied or adequate to manage compliance risks; and
• failed to take reasonable steps to ensure its authorised representatives complied with financial services laws.

ASIC Deputy Chairman Peter Kell said, ‘As this matter shows, inadequate risk management and compliance frameworks, combined with deficient application of a licensees' systems and controls can result in the provision of advice that does not serve the best interests of clients.

'ASIC is committed to raising standards across the financial services industry. We expect licensees to dedicate sufficient resources to appropriately monitor and supervise high risk and newly appointed authorised representatives and to remedy poor advice in a timely manner', Mr Kell said.

ASIC acknowledges the co-operation of NEO's management in resolving ASIC's concerns.

• View the enforceable undertaking