ASIC roundup: Theft of company funds, and unlicensed credit activity

The Australian Securities & Investments Commission’s latest actions and news, October 2 – 6, 2023.

Dean George Scook charged with stealing – October 6, 2023

Dean George Scook has been charged with 11 counts of stealing as an officer of a company – a breach of s378(8) of the Criminal Code.

Allegedly, between August 22, 2018 and June 24, 2019, Scook stole funds of a total of A$675,196 ($429,733) from Rock Mining Australia Pty Ltd, where he also was a shadow director.

The maximum penalty for each charge is 10 years’ imprisonment.

Former insurance adviser banned – October 5, 2023

The former insurance adviser John Durant has been banned for three years from providing or carrying on a financial service, or controlling an entity or performing as an officer within the business.

Durant was the sole director of Assurance Corp Pty Ltd and both were authorized representatives of Insurance Advisernet Australia Pty Limited (IAA). He was found not a fit and proper person to perform those roles. Between July 30, 2019 and February 12, 2021, Durant: 

  • instructed clients to deposit money, intended as payment of insurance premiums, into his personal bank account or to Assurance Corp’s business account, and not into an IAA client monies account as is required by law;
  • failed to pay those to IAA; and
  • misused client funds.

Provide Capital ordered to produce documents – October 4, 2023

Provide Nominees Pty Ltd, trading as Provide Capital, has been ordered by the Federal Court to produce documents that the company failed to produce without reasonable excuse – to ASIC. 

The Commission submitted the order after not getting the documents as part of an ongoing investigation of the company.  

Justice O’Bryan said that “evidence before the Court demonstrates a history of delay and obfuscation on the part of Provide in complying with the Notice. The most egregious example is the redaction of documents produced to ASIC.“ 

Provide Capital must produce the documents within 28 days, including an unredacted copy of each document previously produced in redacted form.

“There is also a complete failure to explain the nonproduction of client documents that the evidence shows would have existed during the relevant period as defined in the Notice.”

Justice O’Bryan

Cigno Australia, BSF Solutions and directors sued for unlicensed credit activity – October 3, 2023

Cigno Australia Pty Ltd and BSF Solutions Pty Ltd, along with directors Mark Swanepoel and Brenton James Harrison, are facing civil penalty proceedings for allegedly providing credit without a license. 

Between July and December 2022, Cigno Australia and BSF provided short-term credit to more than 100,000 consumers via the ‘No Upfront Charge Loan Model’, and continued to charge substantial fees to the consumers without holding an Australian credit license. Some fees exceed the allowed amounts under the Credit Act, and in some cases, consumers were charged fees of more than 600% of their total loan amount. 

ASIC further alleges that BSF provided over A$34m ($21.8m) in loans while Cigno Australia and BSF charged over A$70m ($44.4m) in fees. Swanepoel and Harrison are also alleged to have been involved in the unlicensed activity and Credit Act breaches. 

With the charges, ASIC seeks declarations, pecuniary penalties, and adverse publicity orders. Including injunctions that would permanently restrain Cigno Australia and BSF from engaging in credit activities or accepting fees or charges relating to loan agreements entered into under the ‘No Upfront Charge Loan Model’.  

ASIC also seeks injunctions to restrain Harrison and Swanepoel from carrying on or being involved in any business connected with credit activity.   

ASIC news week 40

The Financial Accountability Regime (FAR), an information package to support and improve risk and governance cultures in the financial services industry, has been published jointly by the Australian Prudential Regulation Authority (APRA) and ASIC.

The FAR document will impose strengthened responsibility and an accountability framework for APRA-regulated entities in the banking, insurance and superannuation industries, including directors and senior executives.

The FAR will replace the current Banking Executive Accountability Regime (BEAR), and will be extended to all APRA-regulated entities, and include conduct-focused prescribed responsibilities.

“Just as the BEAR has helped to sharpen risk culture and governance in the banking sector, we expect the FAR to have a similar positive impact in improving standards of accountability across insurance and superannuation,” said APRA Deputy Chair Margaret Cole.

ASIC Deputy Chair Sarah Court welcomed the extension of the regime: “We believe the regime will increase transparency and accountability in financial firms and help embed a culture of accountability for misconduct at an individual level – accountable individuals will need to understand and closely engage with their obligations under the FAR”.

For the banking industry, the FAR will come into force on March 15, 2024 and on March 15, 2025 for the superannuation and insurance industries.

ASIC appeals Federal Court findings

The Commission has appealed part of the Federal Court’s decision in ASIC’s case against ACBF Funeral Plans Pty Ltd (ACBF) and its parent entity Youpla Group Pty Ltd (Youpla Group), which was handed down on September 5, 2023.

In October 2022, ASIC commenced proceedings against ACBF and Youpla Group for alleged misleading and deceptive conduct where ACBF, among others, claimed to be owned or managed by Aboriginal people when they were not.

 “ASIC has appealed this decision because we are concerned that representations were made to First Nations people that ACBF and its funeral plan had Aboriginal ownership and management which, in ASIC’s view, had the effect of deceiving many Aboriginal consumers into buying the plan,” said ASIC Deputy Chair Sarah Court.

Shine improves disclosure after review

Shine Justice Limited (Shine), which was reviewed and found failing to disclose expenses and interests, has now been found to have significantly improved its disclosure of the accounting for unbilled disbursements and the disbursement funding interest in its June 30, 2023 financial report.

Not disclosing that information earlier, ASIC says, made it difficult to assess the extent and cost of the disbursement funding facility, and to properly understand the risks of Shine’s business model.

Earlier in August, the Federal Court dismissed Shine’s application to recover the full amount of interest on the disbursement funding facility of a recent class action. As a result, Shine made a fair value adjustment of expenses of interest that had previously been recognized as revenue, which, according to ASIC, “highlights the importance of transparent disclosure of interest expense“.

A disbursement funding facility is a loan that is used to pay for costs incurred on behalf of clients in ongoing legal proceedings.