“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.”
ASIC has banned Mr Adrian Chenh and Mr Bill El-Helou from providing financial services for a period of five years each following an ASIC investigation.
ASIC’s investigation found that Mr Chenh and Mr El-Helou provided advice to clients that was in breach of the best interests duty introduced under the Future of Financial Advice (FOFA) reforms.
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.
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.
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.
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.
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.