ASIC roundup: Forged signatures, and a record fine for pricing discount failures

The Australian Securities & Investments Commission’s latest actions, June 26 – 30.

IAL fined a record A$40m over pricing discount failures – June 30, 2023

Insurance Australia Limited (IAL), owned by Insurance Australia Group Limited, has been penalised with the largest ever Court-ordered penalty – A$40m ($26.6m) – for failing to keep discount promises to customers with NRMA-branded insurance policies.

Between March 2014 and September 2019, IAL was found making false or misleading representations to over 600,000 customers by not delivering the full loyalty and no claims bonus discounts they had promised.

By March this year, IAL had completed remediation for all customers who were affected from March 2014, and had paid out A$60m ($39.9m) to them.

This action was a part of ASIC’s work calling on general insurers to pay back A$815m for broken pricing promises.

“IAL used a specific pricing algorithm that limited the discounts renewing customers could receive, ensuring their premiums did not fall below a certain price point. This pricing method meant promised discounts were not passed on.”

Sarah Court, Deputy Chair, ASIC

ASIC warns about David Zohar and companies related to him – June 30, 2023

The Commission has warned David Zohar over sending unsolicited letters on behalf of Lithium Lakes Ltd. He was advising customers that the company was about to issue an Australian Securities Exchange (ASX) prospectus or list on the ASX. Which, as of today, it hasn’t.

Besides Lithium Lakes, ASIC is also concerned that similar statements in unsolicited letters are being issued on behalf of:

  • Greensand Mining Pty Ltd;
  • Silver River Resources Pty Ltd; and  
  • Wattle Gully Nickel Pty Ltd – also referred to as Northern Australian Minerals Pty Ltd.

Zohar has earlier been in court for engaging in unlicensed financial services. In 2015 he and the company Swancove Enterprises Pty Ltd consented to:

  • a declaration that Swancove was carrying out a financial services business where it tried to influence customers to acquire shares in a company associated with Zohar without holding an Australian financial services licence;
  • a statement that Zohar was knowingly concerned in Swancove’s unlawful activities;
  • permanent injunctions that stopped both from participating with or making representations to influence people to acquire shares without holding an appropriate licence.

Former Chair, CEO and CFO of Bruck Textile Technologies to trial – June 30, 2023

Philip James Bart (the former Chair), Geoffrey Thomas Parker (Chief Executive Officer) and Ronald George Johnson (Chief Financial Officer) of Bruck Textile Technologies Pty Ltd will all stand trial on criminal charges over preventing the recovery of employee entitlements, contrary to sections 596AB and 1311 of the Corporations Act.

In July 2014, the company went in to liquidation following the sale of the company’s assets to a related entity, and 58 employees lost their jobs and entitlements, including redundancy payments.

Allegedly, all three agreed to sell company assets with “an intention to prevent the recovery or significantly reducing the amount of redundancy entitlements of Bruck Textile employees”.

At the time of the alleged offending, the maximum penalty for violation of the Corporations Act section 596AB was A$170,000 ($113,065) or 10 years imprisonment, or both.

Extended travel ban against former director – June 29, 2023

The Federal Court has extended the former interim travel restraint orders against Mitchell Atkins, an undischarged bankrupt and former director of private lending firm Magnolia Capital.

The initial ex parte orders prohibit Atkins from leaving the country without the consent of the Court, including surrender all passports or airline tickets outside Australia.

This action is part of ASIC’s ongoing investigation on Atkins and the companies in the failed Magnolia Group, where it’s believed that Magnolia Group operated a private lending business that sourced capital from private investors, and had about A$40m ($26.7m) in unaccounted investor losses.

Accountant forged signatures on audit documents – June 26, 2023

Stephen Robert Allen, the sole director of K.H.N Holdings Pty Ltd and trading as Alkemade & Associates, has been charged for forging auditors’ signatures on multiple documents.

Allegedly, during audits between July 2015 and November 2020, Allen used false signatures of 12 clients on various documents, plus falsified a form which was lodged with ASIC in 2021.

The maximum penalty for violating section 83A(1) of the Crimes Act 1958 (Vic) is 10 years’ imprisonment and five years for violating section 1308(1) of the Corporations Act.

Former financial adviser permanently banned – June 26, 2023

John Talbot Wertheimer, a former Perth financial adviser, has been permanently banned from taking part in any credit activities or providing financial services. In May 2020, Wertheimer made 48 unauthorised transactions on clients trading accounts. Later that year, he also lodged five hard copy investment instruction documents with forged signatures.

Wertheimer was convicted for engaging in dishonest conduct and providing financial services without suitable authorisation. He was sentenced to 18 months’ imprisonment – then immediately released after entering into a recognizance release order in the amount of A$5,000 ($3,337) and required to be of good behaviour for 18 months. He was also fined a total of A$10,000 ($6,674).