Two former directors of failed Sydney securities dealing company Australian Investors Forum (AIF) have been ordered to pay $3.6 million in compensation to AIF and related companies, and have been banned from managing corporations for 25 years.
The orders were made following civil proceedings brought by the Australian Securities and Investments Commission (ASIC) in the Supreme Court of New South Wales, which found Dennis Ralph Anthony and Martin Lloyd-Cocks had contravened numerous provisions of the Corporations Act 2001 in their roles as directors of AIF and related companies.
AIF was started in May 1999 as a licensed securities dealer that ran an investment club, offering members placements in new company floats.
Between its opening and October 2001, AIF received approximately $7.8 million in ‘membership fees’, corporate finance fees or subscriptions for its own shares or shares in initial public offerings (IPOs).
Of that sum, approximately $3.2 million was paid to companies controlled by Anthony, Lloyd-Cocks, and another director, Dominic Luvara.
ASIC commenced proceedings against AIF and related companies in October 2001 following concerns that AIF had offered securities without a disclosure document and its directors had breached their duties to AIF and to the related companies.
AIF was wound-up by the Court in August 2002 and the company was liquidated. Twelve other related companies were subsequently wound-up or deregistered.
In April 2005 the Court found Anthony and Lloyd-Cocks had failed in their duty to exercise care, diligence, and good faith, and had improperly used their positions.
Anthony was also found to have illegally managed AIF and related companies while he was an undischarged bankrupt and therefore prohibited from managing corporations.
AIF was also found to have contravened the conditions of a dealers’ licence by holding clients’ money on trust, and to have offered securities without a disclosure document. Lloyd-Cocks was found to have been knowingly involved in both of these contraventions.
The Court also found one of the related public companies, Sage Global Fund (now Praetorian Capital), failed to obtain shareholder approval for payments made to related companies in contravention of the Corporations Act, and that both Anthony and Lloyd-Cocks were knowingly involved in the contravention.
ASIC previously settled proceedings against other co-defendants Bud Shaheen, Peter Topperwien and Luvara, who provided undertakings to the Court not to manage corporations for two, two and ten years respectively.
Topperwien also undertook to pay the liquidators of AIF $50,000, while Luvara agreed to pay $70,000 to the trustee of AIF Strategic Trust and $230,000 to AIF’s liquidators.
