ASIC appoints liquidator to solicitors mortgage schemes

TheAustralian Securities and Investments Commission (ASIC)has continued its crackdown on dishonest investment schemes, after successfully lodging wind up orders with the Queensland Supreme Court against solicitors mortgage schemes operated by Bells Securities (Bells).

Bells had previously applied to the Queensland Supreme Court to have itself appointed to wind up the scheme under the supervision of Hall Chadwick and with the assistance of Steindl Bell. However, ASIC intervened and opposed the application, seeking the appointment of independent liquidators Gregory Maloney and Peter Geroff, of Ferrier Hodgson.

According to ASIC’s Court application, the regulator has a number of concerns associated with Bells appointing itself as liquidator, including the potential for a conflict of interest to arise if Bells was appointed.

The conduct of the scheme to date, including the delay in winding up, the possible shortfall in funds owing to investors, and the information disclosed by Bells to investors in the scheme when seeking their support to have Bells appointed to wind up the scheme, were also among ASIC’s concerns.

The presiding judge, Justice Wilson, says there is a real possibility of the investors having recourse against Bells and this gives rise to a potential for conflict between Bells’ duty to the investors and its own interests.

While Justice Wilson noted Bells’ application had the support of a majority of the investors, he says there is a significant public interest in ensuring the transparency of the winding up process and the safeguarding of the rights of the investors.

Justice Wilson says there is good reason to be concerned, claiming the investors may not be fully aware of all the circumstances surrounding the making and management of the four remaining loans, and that if Bells' application was approved, these investors might never appreciate the full extent of their rights.

Solicitors mortgage schemes were required to have been wound up or otherwise brought into compliance with the Managed Investments Act before February 28, 2002.

Bells is a trustee company used by the partners of Bells Solicitors in Benowa, a company which later became the law firm Steindl Bells.