ASIC accepts EU from boutique investment firm
The Australian Securities and Investments Commission (ASIC) has accepted an enforceable undertaking (EU) from Sino Investment Services (SIS) and its sole director after concerns about compliance with financial services laws.
Richard Li, was the responsible manager of SIS and an authorised representative of SIS' Australian Financial Services Licence (AFSL).
ASIC's investigation found that:
SIS had not lodged financial statements for the financial years ended 30 June 2013, 30 June 2014 and 30 June 2015;
- As at 31 December 2014, there was a $355,144 deficiency of cash held in the trust accounts of SIS on behalf of the clients of SIS;
- The clients of SIS had not consented to certain withdrawals being made from the trust accounts; and
- Li had authorised the withdrawals as the sole director of SIS.
ASIC's acceptance of the EU requires SIS and Li to repay to clients the entire amount that should have been held in each client's trust account.
SIS and Li acknowledged that due to the absence of a formal trust deed being in place with each of the clients, they misunderstood that the client funds were to be held in trust for the benefit of clients.
ASIC said they were not aware of the legal effect of section 981H of the Act or Corporations Regulation 7.8.02(1).
Under the EU, SIS is required to:
- Lodge an application with ASIC to cancel the AFSL;
- Revoke the authorisation of Li;
- Lodge the outstanding financial statements with ASIC, together with relevant late fees; and
- Send a copy of the EU to all clients.
Li is required to:
- Provide all necessary assistance to SIS to ensure compliance with its undertakings; and
- Provide ASIC with a statutory declaration in respect to repayment of the client money by SIS and him.
Both SIS and Li have agreed to not reapply for an AFSL nor provide financial services in any capacity for a period of 10 years from the date of the EU.
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