Solutions

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:

16-309MR 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.