The Australian Securities and Investments Commission (ASIC) has commenced civil penalty services against Lanterne Fund Services for a failure to meet organisational competence requirements.
The firm operated under a ‘licensee for hire’ business model in which over 200 authorized representatives (ARs) and over 60 corporate ARs provided financial services to wholesale customers under Lanterne’s AFSL.
These included venture capital funds, wholesale property funds, managed investment schemes and corporate advisory services.
Lanterne was responsible for over $1 billion in funds under management and its authorised representatives were paying monthly fees of around $18,000 during the period.
ASIC deputy chair, Sarah Court, said: “ASIC is concerned that for an extended period there was a real risk of investor harm due to shortcomings in Lanterne’s systems and processes.
“It appears to ASIC that Lanterne operated a wholly deficient business, with no compliance staff and almost no risk management processes in place.”
ASIC alleged that Lanterne failed to:
- Have in place adequate risk management systems;
- Have adequate resources (including financial, technological, and human resources) to provide the financial services and carry out supervisory arrangements;
- Maintain competence to provide its financial services;
- Ensure that its representatives were adequately trained;
- Take steps to ensure that its representatives complied with the financial services laws; and
- Do all things necessary ensure that the financial services were provided efficiently, honestly, and fairly.
ASIC was seeking declarations and pecuniary penalties from the Federal Court and also sought an order that an independent expert be appointed to review Lanterne’s systems, processes and controls. Lanterne was also ordered to implement a risk management and compliance program once the report was received.
The date for the first case management hearing is yet to be scheduled by the Court.