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The Australian Securities and Investments Commission (ASIC) has dug deep into the pockets of a special investigation fund in an attempt to advance regulatory action against Storm Financial.
The ‘Assetless Administration Fund’ was established in October 2005 to finance investigations by liquidators into failed companies, where ASIC deems that “further investigation and reporting may lead to enforcement action”.
Liquidators must apply for grants from the fund by providing ASIC with a summary of the alleged offences committed by company directors and provide details of supporting material.
Since December 2007, the fund has given 295 grants to liquidators, the majority of which have fallen well under $10,000. But the liquidator of Storm Financial, Worrells Insolvency and Forensic Accountants, has secured the largest amount ever granted by the fund. According to ASIC documents, Worrells received a grant of $441,760, but a statement from the liquidator said it had obtained more than $450,000 of funding. The previous record for a grant was $99,000.
The fund was initially created with a focus on stamping out ‘phoenix’ activity, where directors transfer the assets of an indebted company into a new company, also under their directorship, leaving nothing for creditors in the old company.
But the fund also examines other matters, including failures by directors to ensure the company has maintained adequate books and records, insolvent trading and fraud.
A statement from ASIC at the time of the launch of the fund said the grants would harness the skills of the private sector to ensure ASIC has “adequate information to identify and pursue misconduct by company officers in the lead-up to a company failure”.
The material brought to ASIC by Worrells may form evidence in any subsequent civil or criminal proceedings.
Raj Khatri of Worrells said the liquidator had identified more than 40 potential witnesses for examination, but that the list included “many who would be called simply to provide information about Storm’s operations rather than to be examined about any suspected wrongdoing by them”.
Khatri said that, subject to the availability of court time, the group was hopeful of starting the examinations in the first week of September.
