Ombusman

Gold Coast director and property developer sentenced to eight years’ imprisonment

Gold Coast director and property developer sentenced to eight years’ imprisonment

“Owing investors approximately $9 million (17-246MR). Many of the investors were pensioners and were approached by telemarketing or word of mouth. Investors were convinced to borrow against their homes and were told that their money would be used to develop property in Tasmania. Instead, the money paid by investors was used to pay back interest owed to other investors, payments to employees, cash withdrawals and transfers to personal bank accounts.”

16-444MR ASIC permanently bans former financial planner Stewart Banks

ASIC has permanently banned Queensland financial adviser Mr Stewart James Banks, from the Gold Coast, from providing financial services and engaging in credit activity.  

Mr Banks was employed as a representative of Professional Investment Services (PIS) from 18 April 2007 until 20 May 2015. 

ASIC found that during the period between September 2012 and April 2015, Mr Banks had acted dishonestly and engaged in misleading and deceptive conduct under the Corporations Act, in that he: 

  • Created documents, invoices, and fee forms in relation to six clients which were false because he did not undertake the hours of work claimed and was not entitled to the fees charged; 
  • Told two clients that he was paid by the insurance product provider when in fact he drew fees directly from clients' superannuation; 
  • Provided false declarations to the trustee of the superannuation fund in order to access fees from six clients' superannuation accounts totalling $286,530.60; and 
  • Gave funds to clients from their superannuation, and unknown to his clients, kept a portion of the funds for himself.  

ASIC also found that Mr Banks was not of good fame and character as his conduct was dishonest and involved the betrayal of client trust, as well as deceiving PIS and the trustee of the superannuation fund.  

ASIC Deputy Chair Peter Kell said, 'ASIC will take action to remove dishonest persons from the financial services and credit industry to protect the public.  

'Mr Banks' conduct was particularly harmful in that his actions eroded his clients' superannuation, which exists for the sole purpose of providing retirement benefits to members, or to their dependents if a member dies before retirement.' 

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

16-433MR ASIC bans former ANZ Financial Planning adviser from financial services

ASIC has banned Mr Andrew TambyRajah, a former employee of ANZ Financial Planning, from providing financial services for a period of five years.

Mr TambyRajah, of Sydney, New South Wales was a financial planner with ANZ Financial Planning at Hurstville between 19 January 2006 and 30 July 2014.

Mr TambyRajah was banned from providing financial services as ASIC found that he engaged in misleading and deceptive conduct by creating false documents and falsely amending documents contained on client files. The conduct included:

  • writing clients' names and initials on documents in the places designated for their signatures and initials;
  • changing the dates recorded on a number of documents; and
  • creating false investor profile forms for two clients by photocopying forms they had signed in previous years and changing the dates on the copied documents.

Deputy Chairman, Peter Kell said, 'Financial advisers are important gatekeepers who must act honestly to increase broader public confidence in the financial services industry.

'This banning should serve as a deterrent to any financial adviser tempted to act dishonestly.'

Mr TambyRajah has the right to seek a review of ASIC’s decision to the Administrative Appeals Tribunal.

Background

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; and
  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 TambyRajah:

16-135MR South Australian director charged with misappropriating $1.8 million in SMSF property investments

Following an ASIC investigation, Mr George John Nowak has appeared in the Adelaide Magistrates Court charged with thirty one counts of deception and one count of dishonest dealings with documents.

ASIC investigated Mr Nowak's conduct in dealing with members of self-managed superannuation funds (SMSFs) who were undertaking property purchases offered by companies of which he was a director, including EJ Property Developments Pty Ltd. It is alleged that Mr Nowak misappropriated $1.8 million in SMSF monies by not holding funds in a designated account and by not applying those funds towards the intended property purchase.

Mr Nowak was not required to enter a plea and was granted conditional bail. The matter is listed for return at the Adelaide Magistrates Court on 12 July 2016. 

The Commonwealth Director of Public Prosecutions is prosecuting these matters.

Background

The charges of deception contrary to section 139(b) of the SA Criminal Law Consolidation Act 1935 each carry a maximum penalty of ten years imprisonment.

The charge of dishonest dealings with documents contrary to section 140 of the SA Criminal Law Consolidation Act 1935 carries a maximum penalty of ten years imprisonment.

Previous media releases in relation to this matter incude 14-024MR and 15-048MR.

In 2012 in response to the growth in SMSFs, ASIC established the SMSF Taskforce. The Taskforce continues to meet regularly to examine high-risk and emerging SMSF issues such as property spruiking to SMSFs, unlicensed conduct and false and misleading advertising of SMSFs. 

Outcomes and actions stemming from the SMSF Taskforce include:

  • ASIC accepted an enforceable undertaking (EU) from CMH Financial Group Pty Ltd and the sole director, Daniel White, after an ASIC surveillance found CMH had failed to provide advice about self-managed superannuation funds that was appropriate and in the best interests of clients (refer 16-097MR);
  • Ms Sarah Jane Busteed was charged with three counts of dishonestly obtaining a financial advantage by deception and one count of dealing with over $100,000 that was the proceeds of crime (refer: 16-040MR);
  • Superannuation Warehouse Australia Pty Ltd was ordered to pay a penalty of $25,000 for false and misleading“Free SMSF Setup” advertising (refer: 15-332MR).
  • The Supreme Court of NSW found Park Trent Properties Group Pty Ltd had been unlawfully carrying on a financial services business for over 5 years by providing advice to clients to purchase investment properties through a SMSF (refer: 15-300MR).
  • Dixon Advisory Group Limited complied with two ASIC infringement notices, paying two $10,200 penalties after including potentially misleading claims on its website (refer: 15-207MR).
  • The credit licence of Queensland-based Smithson & Baye was cancelled following an investigation into a property and SMSF promoting group (refer: 15-228MR)
  • ASIC released two information sheets to improve the quality of advice provided by advisers onSMSFs: Information Sheet 205 Advice on self-managed superannuation funds: Disclosure of risks(INFO 205) and Information Sheet 206 Advice on self-managed superannuation funds: Disclosure of costs (INFO 206) (refer 15-192MR).
  • Omniwealth Services paid a $10,200 penalty for potentially misleading claims on its website (refer: 15-190MR).
  • The principal of Sherwin Financial Planners, Bradley Thomas Sherwin, was charged with fraud. The charges relate to the use of SMSFs of former clients of Sherwin Financial Planners (refer: 15-158MR).
  • The Federal Court of Australia ruled that Craig Gore and several other parties and financial services businesses, including Queensland-based ActiveSuper and Royale Capital, contravened sections of the Corporations Act or were knowingly concerned in those contraventions. (refer: 15-134MR)
  • Australian Financial Planning Solutions Pty Ltd paid $10,200 in penalties for potentially misleading SMSF ads (refer: 15-052MR).
  • ASIC banned the founder of the Charterhill Group of Companies, George Nowak, from providing financial services until 3 July 2017 on the basis that Mr Nowak is an undischarged bankrupt (refer: 15-048MR).
  • Interprac Financial Planning agreed to address ASIC concerns relating to advice provided to some clients about SMSFs (refer: 14-258MR).
  • Sentry Financial Services agreed to address ASIC concerns about SMSF advice provided to clients (refer: 14-109MR).
  • SuperHelp Australia paid a $10,200 penalty after making potentially misleading statements about the cost of setting up SMSF (refer: 14-051MR).
  • Media Super paid $10,200 in penalties for potentially misleading SMSF ads (refer: 14-001MR).
  • Spring Financial Group entered into an enforceable undertaking following ASIC concerns about the level of monitoring and supervision of its representatives (refer: 13-263MR).
  • Anne Street Partners agreed to engage an independent expert following ASIC concerns about SMSF advice provided to clients (refer: 13-248MR).
  • We published Report 337 Improving the quality of advice given to SMSF investors. (refer: 13-081MR).

SMSFs will continue to be a focus in ASICs enforcement work.

Editor's note 1:

On 12 July 2016, declarations were filed at the Adelaide Magistrates Court. The matter was listed for return on 22 September 2016 in the Adelaide Magistrates Court for Mr Nowak to enter a plea.

Editor's note 2:

On 22 September 2016, the matter was adjourned until 13 October 2016.

Editor's note 3:

On 13 October 2016, the matter was adjourned until 10 November 2016.

Editor's note 4:

The matter has been further adjourned until 19 January 2017.

16-368MR ASIC permanently bans former financial adviser Ashley Howard

ASIC has permanently banned former NSW financial adviser Mr Ashley Grant Howard from providing financial services after an investigation found he had:  

  • engaged in dishonest conduct; 
  • held out that trading he was conducting was authorised; 
  • provided financial services when not licensed or authorised to do so; and  
  • engaged in conduct that was likely to mislead. 

ASIC found that Mr Howard had failed to comply with the Corporations Act in that he: 

  • used more than $1.8 million of client funds for his own benefit or the benefit of others (which included paying for cosmetic surgery for his partner, purchasing a house and settling debts to Jordan Belfort, the so-called 'Wolf of Wall Street'); and 
  • provided false information and documents to clients and third parties. 

ASIC also found that Mr Howard had failed to: 

  • assist his trustee in bankruptcy by not lodging a statement of affairs; 
  • assist the liquidator of Meridien Capital Ltd, a company of which he was a director, by not providing a report as to the company's affairs, not providing information as reasonably required and directed by the liquidator and did not produce the books and records of the company; 
  • comply with Notices served by ASIC to produce documents and attend an examination. 

Mr Howard's dishonest unauthorised use of the $1.8 million from clients led to ASIC finding that he was not of good fame and character. 

ASIC Commissioner John Price said, 'ASIC will take action to remove persons from the financial services industry to protect the public. Mr Howard's conduct was particularly bad in that, on occasions, he preyed on elderly and vulnerable people.' 

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

Background 

In 2014 ASIC commenced an investigation into the circumstances surrounding the misappropriation of funds from the initial public offering for Elsmore Resources Limited [ASX code: ELR] ('Elsmore'). Elsmore listed on the ASX on 20 December 2013 at a time when Mr Howard was a director. 

During the course of this investigation ASIC became concerned about the conduct of various individuals, including Mr Howard's, and which has led to his permanent banning from providing financial services.  

Mr Shaun Morgan, a New Zealand national, also came to ASIC's attention during the investigation and led ASIC to issue a public warning notice about Mr Morgan and his companies (15-016MR). Subsequently last year ASIC permanently banned Mr Morgan from providing financial services (15-140MR) and he was removed as a director from various Australian companies in light of his criminal conviction in the United States (15-275MR). 

Elsmore itself has pursued legal action to recover the allegedly misappropriated funds from Mr Howard and his associates, Periwinkle Investments Pty Ltd, HF Global Corporate Financial and Harry Fung. Mr Howard is currently a bankrupt, which has impacted on the ability of the company to enforce a settlement agreement entered into with Mr Howard requiring him to repay the misappropriated funds. Most recently the Supreme Court of New South Wales ordered Mr Fung to pay approximately $680,000 to the company. 

Elsmore Resources Limited was delisted by the ASX on 15 August 2016. 

ASIC's investigations into Mr Howard and other associated individuals continue.

16-357MR Federal Court declares 21st Century land banking schemes to be unlawful and bans Jamie and Dennis McIntyre for 10 years

The Federal Court has declared that land banking developments operated by Jamie and Dennis McIntyre were unregistered managed investment schemes in a decision delivered by His Honour Justice Bromwich on 17 October 2016. 

The Court also made orders that Jamie and Dennis McIntyre be disqualified from managing corporations and restrained from carrying on financial services for a period of 10 years each, due to them being officers of companies that had failed, by virtue of them being wound up, and which had also repeatedly contravened the Corporations Act .

Jamie and Dennis McIntyre agreed to the banning orders made against them.

Further, the Court made orders to wind up the unregistered managed investment schemes, which were promoted and advertised by the 21stCentury land banking companies*.

The unregistered managed investment schemes are known as:

  • Botanica, located at 805 Archer Rd, Kialla, Victoria 3631
  • Secret Valley Estate, located at955, Old Sydney Road, Bylands, Victoria 3762
  • Oak Valley Lakes Estate & Resort, located at 124 Booth Road, Brookhill, Townsville, Qld 4816
  • Bendigo Vineyard Estate & Resort, located at51 Andrews Road, Bendigo, Victoria 3551
  • Melbourne Grove Estate, located at1491 Dohertys Road, Mount Cottrell, Victoria 3024

Simon Wallace-Smith and Robert Woods of Deloitte have been appointed as joint liquidators of the unregistered managed investment schemes.

ASIC Commissioner Greg Tanzer said, "The high banning periods ordered by the Court in this case are necessary to protect the public from those who are officers of companies that repeatedly contravene the Corporations Act.  It also serves as a warning to those involved in unlawful unregistered managed investment schemes, including those that involve land banking, that ASIC will take action."

ASIC's investigation into the matter is ongoing.

Background

ASIC commenced proceedings in August 2015 against Jamie and Dennis McIntyre and the 21st Century land banking companies in relation to their promotion and sale of interests to investors in five land banking schemes (Refer: 15-214MR).

ASIC’s proceedings are part of ASIC's wider and ongoing investigation into land banking schemes.

More information about ASIC's proceedings, including frequently asked questions

*Jamie McIntyre refers to his companies as the "21st Century Group". 21st Century Group Pty Ltd (ACN 108 150 545) is not a defendant to the proceeding, and ASIC is not aware of any connection between 21st Century Group Pty Ltd and the defendants.

16-323MR ASIC bans former Westpac financial adviser

ASIC has banned Adelaide financial adviser Michael Mahoney from providing financial services for a period of four years.

Mr Mahoney was employed by the BT Financial Group Pty Ltd (BTFG) in the Westpac Scaled Advice Insurance business from October 2013 to July 2014 to provide general advice only to retail clients on insurance products.

ASIC's investigation found that during the period Mr Mahoney was employed at BTFG, he engaged in conduct that was misleading and deceptive. Specifically, he entered false information regarding various clients' health or health-risk factors in telephone applications for insurance policies issued by Westpac Life Insurance Services Ltd (WLIS). This resulted in WLIS issuing policies to clients based on false information and assuming greater risks without having an opportunity to undertake an assessment of those risks.

WLIS has agreed to honour the affected client policies.

ASIC Deputy Chairman Peter Kell said, 'This outcome shows that ASIC expects employees who are providing financial services to maintain high standards and not engage in conduct that is misleading and deceptive.'

Mr Mahoney 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, 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 Mahoney:

16-322MR ASIC bans Brisbane financial advisor

ASIC has permanently banned Mr Sandeep Madhoji from providing financial services or  engaging in credit activity after he was sentenced to imprisonment for fraud charges. This prosecution was the result of a joint operation between the Queensland Police Service and ASIC. 

The charges stemmed from conduct that occurred between 2 September 2010 and 11 July 2012. During this period, Mr Madhoji misused clients' funds by applying some client's funds to cover the loss made on other client portfolios.

As a result of Mr Madhoji's actions, 14 clients collectively lost $3,251,281. These losses were incurred by Mr Madhoji using his recommended trading strategy.

Mr Madhoji made false statements to his licence holder Redwood Capital Group and to his clients to conceal his losses. He acted outside his authority by making multiple unauthorised transfers and withdrawals from the accounts to hide the losses. Mr Madhoji also falsified client account statements in relation to the relevant transactions.

Mr Madhoji committed these offences to enhance his reputation to clients and create an illusion that he was a highly successful trader.

ASIC Deputy Chairman Peter Kell said, 'Dishonesty by any financial advisor will not be tolerated by ASIC. We will investigate and prosecute instances of dishonesty to ensure that consumers have confidence in the financial system.'

Background

On 26 August 2016, Mr Madhoji was sentenced to 7.5 years imprisonment with a non-parole period of 22 months in the Brisbane District court on 55 charges of fraud under sections 408C of the Queensland Criminal Code.  

Mr Madhoji was an Authorised Representative under Redwood Capital Group Pty Ltd, AFSL No. 289327. AFSL No. 289327 held by Redwood Capital Pty Ltd was cancelled on 9 April 2013.

Mr Madhoji's status as an Authorised Representative was ceased on 1 July 2012.

This matter was prosecuted by the Queensland Director of Public Prosecutions.

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:

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)