ASIC roundup: A$670,500 penalty over ‘set and forget’ compliance culture

The Australian Securities & Investments Commission’s latest actions and news, December – December 4 – 15, 2023.

Janet Cameron found guilty of not disclosing her interest in Bellamy’s Australia – December 15, 2023

The Court has found Janet Heather Cameron guilty of one count of failing to lodge a substantial holder notice regarding her interests in Bellamy’s Australia Limited, and one count of making a false and or misleading statement.

Besides failing to disclose her and her associates’ relevant interest in the Black Prince Private Foundation (which owned 14 million Bellamy’s shares), Cameron was also found making misleading statements in a Notice of Initial Substantial Holder which was submitted to ASIC in 2017.

Making a false or misleading statement in a document lodged with ASIC is a breach of section 1308(2) of the Corporations Act, and can bring a maximum penalty of 12 months’ imprisonment, or a penalty of A$10,800 ($7,269), or both.

The maximum penalty for failing to lodge a substantial holder notice (in August 2014) was six months’ imprisonment or a A$4,250 ($2,861) penalty or both.

Civil proceedings against Adam Blumenthal and EverBlu Capital – December 15, 2023

Civil penalty proceedings against Adam Blumenthal have begun over alleged market rigging and breaches of his director’s duties of EverBlu Capital Pty Ltd and Creso Pharma Limited (now known as Melodiol Global Health Limited).

Blumenthal was found:

  • failing to comply with EverBlu’s conflicts of interest policy and was involved in its breaches of its obligations as an AFS licensee;
  • facilitated loans from his private company Anglo Menda Pty Ltd to certain EverBlu clients to trade in ASX-listed Creso Pharma Limited shares, a company where Blumenthal was also a director. The loans were a breach of EverBlu’s personal dealing policy, and included lending finfluencer and EverBlu client Tyson Scholz more than A$7m ($4.7m), and more than A$5m ($3.36m) to another Everblu client; and
  • engaged in market rigging on 14 occasions during 10 separate days which created false or misleading appearances for Creso shares on the ASX.

Blumenthal has agreed to be disqualified and to not be involved in financial services for five years, and to undertake training prior to re-entering the industry.

Between March 18 and November 15, 2021, EverBlu was also found breaching its obligations as an AFS licensee by not properly having and following adequate controls relating to the receipt and execution of client orders, the use of its suspense account, the maintenance of records and the management of conflicts of interest.

EverBlu has admitted breaching its obligations, and will cease offering any financial services to new clients and apply for cancellation of its AFS licence.

Former insurance broker permanently banned – December 14, 2023

The former insurance broker Cesar Cutro has been permanently banned from providing any financial services after lacking “honesty, integrity, professionalism, and sound judgment, and is likely to contravene financial services law”.

Between January 2019 and November 2022, Cutro was found engaging in conduct that was misleading or deceptive, and:

  • misled clients about the true base premium and the true broker fee within their insurance policies;
  • falsely told the auditor that two clients knew about of and/or agreed to higher administration fees listed in the system invoices when they were not; and
  • added his own personal bank account details into refund request forms for two clients to divert client refunds into.

Former adviser banned five years – December 13, 2023

Darron Mink, a former authorised representative of AMP Financial Planning Pty Limited (AMPFP) and sole director of Pinnacle Financial and Investment Services Pty Ltd, has been banned from providing financial services or engaging in credit activities for five years due to not being adequately trained or competent to provide such services.

ASIC found that Mink:

  • set himself in real conflict of interest, and failed to manage that conflict; 
  • failed to provide appropriate advice to some clients; 
  • shared advice documents that were confusing and did not reflect all of the provided advice; and 
  • not understood the importance of following a proper process in relation to acquiring client signatures.

Director Peter Landau sentenced to prison – December 12, 2023

The former Continental Coal and Citation Resources director Peter Neil Landau has been sentenced to five years and two months’ imprisonment – with a non-parole period of three years and two months – for five stealing offences and one offence of forging and uttering contrary to the Criminal Code (WA).

He was also sentenced to a further 12 months’ imprisonment in relation to two Corporations Act offences. The term commences at the expiration of his non-parole period, where he must serve six months before being released and entering into a recognisance in the sum of A$1,000 ($673) to be of good behavior for six months.

Landau was a director of former ASX-listed companies Citation Resources Limited and Continental Coal Limited, and pleaded guilty in August 2022 to:

  • five counts of stealing a total of A$2.2m ($1.5m) as a director of Citation – breaching section 378(8) of the Criminal Code (WA);
  • one count of forging and uttering a Citation bank statement that falsely recorded the account balance as A$675,658 when the correct balance was A$117.55 ($454,651 – $79) – breaching section 473 of the Criminal Code (WA);
  • one count of authorizing the giving of false or misleading information to the ASX on the affairs of Continental Coal. The information did not disclose that its only income-generating asset had gone into administration, and stated falsely that shares had been issued and funds had been raised – breaching sections 1309(1)(c) and 1311(1) of the Corporations Act; and
  • one count of providing false information to ASIC, saying that Continental Coal had received A$2.6m from investors when it was only $57,238.30 ($1.7m – $38,518) – breaching sections 1308(2) and 1311(1) of the Corporations Act.

Landau also pleaded guilty to one count of failing to hold applicant money on trust after transferring A$1,032,000 ($694,669) from a Continental Coal trust account into various other accounts prior to securities being issued or the money being returned to the applicants. This charge will be sentenced separately.

Registration prohibition order against Stephen Rogers – December 12, 2023

The Financial Services and Credit Panel (FSCP) has made a registration prohibition order against financial adviser Stephen Rogers until after December 6, 2025.

Rogers was found to have given non-compliant advice to a client and acted in a way that was misleading or deceptive. His financial adviser registration has been cancelled, and is prohibited from being registered with ASIC, and can’t give personal advice to retail clients on financial products during the period.

Credit broker prohibited from engaging in credit activities for two years – December 12, 2023

Robin Raju has been prohibited from engaging in credit activities for two years, including under the credit licence of Robin Raju & Associates Pty Ltd (RRA), after submitting a Credit Licence Annual Compliance Certificate for RRA which contained false and misleading statements in 2022. In the statement, Raju did not disclose that he had been the subject of disciplinary action by the Tax Practitioners Board, among more.

$900,000 penalty for ANZ over continuous disclosure failure – December 8, 2023

Following the ’landmark victory’, Australia and New Zealand Banking Group Limited (ANZ) has been ordered by the court to pay a penalty of A$900,000 ($605,291) for breaching its continuous disclosure obligation during a A$2.5 billion ($1.7 billion) institutional share placement in 2015.

The Court found that ANZ breached section 674(2) of the Corporations Act by failing to notify the Australian Securities Exchange that the ANZ shares, valued between A$754m-A$790m ($508m-$ 532m), were offered in an Institutional Placement and were to be acquired by its underwriters.

ANZ was also ordered to pay ASIC’s costs of and incidental to the proceedings.

“If such a contravention occurred today, the maximum penalty could be anywhere between A$15m to A$780m. Listed entities should see today’s penalty decision as a strong and purposeful warning to fully meet their continuous disclosure obligations.”

Karen Chester, Deputy Chair, ASIC

Prohibition order against financial adviser Timothy Anderson – December 8, 2023

The FSCP has made a registration prohibition order against Timothy Anderson until after May 17, 2025.

Anderson was found to be insolvent under administration, and has had his financial adviser registration cancelled. He is also prohibited from being registered with ASIC, and can’t give personal advice to retail clients on relevant financial products during the period.

Food services director disqualified for one and a half years – December 8, 2023

The former food services industry director Simon Cauchi been disqualified from managing corporations for one and a half years in relations to his involvement in the four failed companies Fresh Food Wholesale Pty Ltd, Fresh Start Equity Pty Ltd, Oh! That’s Good! Food Group Pty Ltd, and Life Pack Pty Ltd.

As a director between September 2015 and October 2021, ASIC found that Cauchi failed to meet his director’s obligations by:

  • failing to ensure Fresh Food Wholesale Pty Ltd and Fresh Start Equity Pty Ltd complied with tax obligations;
  • improperly allow Fresh Food Wholesale Pty Ltd to acquire the failing business of Fresh Start Equity Pty Ltd, which caused detriment to Fresh Food Wholesale Pty Ltd;
  • improperly transferred A$297,406.50 from Fresh Start Equity Pty Ltd in repayments to Fresh Food Wholesale Pty Ltd, which caused detriment to Fresh Start Equity Pty Ltd; and
  • letting Fresh Start Equity Pty Ltd trade while insolvent.

At the time of ASIC’s decision, the companies owed a combined total of A$9,575,616 ($6,284,273) to unsecured creditors, including A$529,831 ($347,674) to the Australian Taxation Office.

A$670,500 penalty over ‘set and forget’ compliance culture – December 6, 2023

Instinet Australia Pty Ltd has paid a A$670,500 ($449,895) penalty to comply with an infringement notice given by the Markets Disciplinary Panel (MDP) over “poor market awareness and a ‘set and forget’ approach” to compliance.

Between April 1, 2011 to October 11, 2022, Instinet operated the BLX Australia crossing system (or ‘Dark Pool’). According to the MDP, this contravened Rule 6.1.1 of the Market Integrity Rules (between January 1, 2021 and October 11, 2022), as the BLX was wrongly referencing the ASX best bid and offer, rather than the National Best Bid and Offer (NBBO).

During that time, 3,093 trades valued at A$13.48m ($9m) matched off-market and reported as Trades with Price Improvement, but did not provide meaningful price improvement over the NBBO for clients.

Allegedly, Instinet also contravened Rule 5A.2.2 by failing to provide clients with all fundamental information about the BLX crossing system. And contravened Rule 7.4.2 by incorrectly reporting the BLX crossing system as the execution venue for 940 transactions where these transactions were executed off-market but not on the BLX crossing system – which happened between January 2021 and January 2023.

“Instinet should have had systems and controls in place regarding the configuration and periodic review of critical trading technology systems and to ensure their ongoing integrity and compliance with the Rules.”

The Markets Disciplinary Panel

AAT affirms ban on adviser Pamela Anderson for two years – December 6, 2023

The Administrative Appeals Tribunal (AAT) has affirmed ASIC’s decision to ban financial adviser Pamela Anderson from providing financial services for two years. Earlier, ASIC found that she failed to act in the best interests of her clients, advised clients to invest where there was conflict of interest, and gave non-compliant statements of advice and did not to provide information on costs and benefits lost.

The AAT also affirmed to prohibit Anderson from managing, supervising or auditing the provision of financial services, and the provision of training about services or products until the end of ban.

Henry Eng Chye Heng guilty to market manipulation – December 5, 2023

Henry Eng Chye Heng, executive chair and managing director of Eneco Refresh Ltd, has pleaded guilty to one count of market manipulation and one count of creating a false or misleading appearance of active trading.

Allegedly, Heng used share trading accounts held in the names of his family on 24 occasions between December 2020 and December 2021 to manipulate the share price of Eneco. He also used the accounts to create false or misleading appearance of active trading in Eneco between April 30, 2021 and November 30, 2021.

Besides pleading guilty to the charges, Heng was also charged with nine counts of failing as a director to notify the market operator of a change in his relevant interests breaching section 205G(10) of the Corporations Act. He is due to appear in court in February 2024 for sentencing.

The maximum penalty for each contravention of market manipulation and creating a false or misleading appearance of active trading is 15 years imprisonment, and a maximum of a A$6,660 ($4,483) fine for each breach of failing to notify the market operator of a change in relevant interests.

Director charged with numerous criminal offences – December 4, 2023

Former company director and undischarged bankrupt Ian Omar Chester has been charged with numerous criminal offences in relation to multiple companies engaged in Gold Coast property development projects.

On December 4, 2023, Chester appeared in the Court – charged with 15 counts of fraud, three counts of falsifying company books and records and two counts of providing false or misleading information to the members of a corporation in connection with his dealings with the Vested Capital Pty Ltd and several other associated companies.

The maximum penalties for fraud offences range between 14 to 20 years imprisonment, and two years’ imprisonment or 100 penalty units (or both) for falsifying company books. Providing false information to members can bring five years imprisonment or a fine of A$66,600 ($43,807) or both.

In July 2021, 14 companies associated with the Vested group were wound up, and another company was placed into voluntary administration and is now in liquidation.

ASIC also took action to preserve certain assets from Chester and his wife, and asset preservation orders were made later. Chester was declared bankrupt in July 2022.

ASIC news weeks 49-50

Ongoing investigation

Linda Smith and Robert Kirman of McGrathNicol have been appointed by the Federal Court as corporate receivers and managers of Australian Financial Services licensee Brite Advisors Pty Ltd.

Smith and Kirman will conduct further investigations into Brite and the approximately A$1 billion ($673,000) client pension funds under its management.

The Court appointed the receivers after concerns from ASIC the Investigative Accountants, which were both “wide-ranging and serious”, and where an amount of $69m in client funds that has not been adequately explained by Brite.

November 2023 financial adviser exam results

The exam results from the 23rd Financial Advisers Exam cycle held in November has been released, where:

  • 219 people sat the exam;
  • 66% (145) passed the exam; and
  • 70% (154) sat the exam for the first time.

To date, 20,875 individual candidates have taken the exam, and over 19,310 (92%) have passed.

ASIC Chair Joe Longo and the Australian Financial Security Authority’s Chief Ombudsman and Chief Executive Officer David Locke have signed a memorandum of understanding (MoU) on how they will continue to work together to support a fair and efficient financial services sector.

ASIC and the Australian Prudential Regulation Authority (APRA) have issued a joint letter to life insurers and friendly societies (life companies) which outlines observations of life companies’ past practices, following concerns raised in December 2022.

The annual dashboard of regulatory costs for 2022-23 has been released by ASIC. It outlines regulatory costs for each sector and subsector under the industry funding model – a requirement under s138 of the Australian Securities and Investments Commission Act 2001.

ASIC has released the Report 778 Review of online trading providers, which highlighted observations from its surveillance of online trading providers in 2022-2023 and clarified its regulatory expectations. It follows last year’s warning to online trading providers on high-risk offerings to retail investors like securities lending and provision of crypto-asset trading.

“ASIC has taken multiple actions to protect retail investors from high risk offers and business practices that may be unfair, inappropriate or result in poor outcomes. Our more proactive approach to identifying and disrupting emerging risks and harms is in response to the rapid pace of change we have observed in recent years. Today’s report and our recent consumer warning campaign are reflective of this,” said ASIC Commissioner Simone Constant.