Companies in the Mayfair 101 Group have been found to have made false, misleading, or deceptive statements in its debenture products advertisements by the Federal Court.
According to an announcement by the corporate regulator, the court found that in relation to Mayfair Wealth Partners trading as Mayfair Platinum, Online Investments trading as Mayfair 101, M101 Nominees and M101 Holdings represented that:
- Mayfair’s debenture products were comparable to, and of similar risk profile to, bank term deposits, when Mayfair’s debenture products exposed investors to significantly higher risk than bank term deposits (Bank Term Deposit Representation);
- The principal investment would be repaid in full on maturity, when investors might not receive capital repayments on maturity, or at all, as Mayfair could elect to extend the time for repayment for an indefinite period of time; and
- Mayfair’s debenture products were specifically designed for investors seeking certainty and confidence in their investments and therefore carried no risk of default, when there was a risk that investors could lose some, or all, of their principal investment.
The court also found Mayfair Platinum, Mayfair 101, and M101 Nominees engaged in misleading or deceptive conduct by representing that the M Core Fixed Income Notes were fully secured financial products when the funds were:
- Lent to a related party and not secured by first-ranking, unencumbered asset security or on a dollar-for-dollar basis or at all;
- Used to pay deposits on properties prior to any security interest being registered; and
- Used to purchase assets that were not secured by first-ranking, unencumbered asset security.
Justice Anderson found the bank term deposit representation were “not comparable to, or a proper alternative to, bank term deposits.
He also said the use of sponsored link internet advertising was “tolerably clear that the defendants’ marketing strategy was addressed to persons searching for a term deposit in order to divert them to the defendants’ websites”.
“I am satisfied that the Mayfair products have been, in fact, designed by the defendants to produce a result which is uncertain for investors and could not on any reasonable view be described as an investment with no risk of default,” he said.
“Mr Mawhinney was the directing mind and will, and the ultimate beneficiary, of each of the defendants.”
Commenting, the Australian Securities and Investments Commission, deputy chair, Karen Chester, said firms needed to make sure they accurately described their products when advertising.
“Our ‘True to Label’ project that we commenced in late 2018 identified 30 funds with over $10 billion across these funds, that are misleading investors through online advertising, especially when investors are seeking yield in a low interest rate economy. The online advertising is misleading by claiming to offer products that involve less risk, when in reality, investors could lose some or all of their investments,” she said.
“Advertisements also claimed investors could get their invested money out when they wanted but that was not the case. This case is a warning that ASIC will not only take action where investments are marketed as safer, lower risk, or more liquid when they are not, but when search engines are used in a misleading or deceptive way to entice investors to products they are not searching for.”
