Q3 sees plenty of ASIC bans and court action

As the third quarter comes to an end, Money Management looks back at all the busy court action that has kept the corporate regulator busy in the last three months.

It includes further crackdowns on SMSF auditor misconduct and a number of permanent bans, including one adviser who stole over $1 million in client funds to fund a gambling addiction and another who spent up to $10 million in yachts, race cars and international travel.

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July

Early in the month, ASIC permanently banned Sydney-based director David Henty Sutton and cancelled the Australian financial services (AFS) licence of his company McFaddens Securities over concerns about him making offers of investment in unlisted shares.

ASIC’s concerns arose out of Sutton’s conduct in making offers of investment in unlisted shares via McFaddens to Australian and overseas investors in companies, including some companies involved in a case from April 2023, where a Brisbane-based adviser, Kristofer Ridgway, was permanently banned. Ridgway worked at Shaw and Partners, where he recommended clients in international unlisted shares sourced by McFaddens.

The corporate regulator also applied to the Federal Court to disqualify director Sasha Hopkins and wind up his company, The A Team Property Group, five of the investment schemes and the associated companies and trusts used by Hopkins for alleged unlicensed conduct.

Additionally, ASIC cracked down on eight SMSF auditors for breaches of their obligations, including breaches of auditing and assurance standards, independence requirements, registration conditions, or because ASIC was satisfied they were not a fit or proper person. This brought the total for the past year to 26.

August

The month began with NWQ Capital Management’s AFS licence being suspended due to unmet financial requirements. The Perth-based investment firm failed to hold sufficient net assets required to meet the licence conditions. ASIC’s suspension would last until 25 January 2024.

Days later, the stay order for former Select AFSL and BlueInc Services managing and sole director, Russell Howden, was dismissed by the Federal Court. In July, Howden was penalised $100,000 for breaching his director duties and was disqualified from managing corporations for five years. The case, brought by ASIC, concerned the mis-selling of insurance over the phone to consumers, including First Nations consumers from remote communities where English was not their first language.

A Sydney adviser, Donald James Cuthbertson, was also permanently banned in August. A director of three companies, he was found not fit and proper to provide financial services. ASIC found Cuthbertson misappropriated investor funds; made false or misleading representations in connection with redeemable preference shares and unlisted shares he offered; made false or misleading representations regarding the level of risk involved in trading contracts-for-difference; and was involved in dealing with derivatives without appropriate authorisation. His AFSL was also cancelled.

At the end of the month, ASIC commenced “urgent proceedings” in the Federal Court against former Nextgen adviser David Valvo and the company Your Financial Freedom, of which he is the sole director and shareholder, regarding fees charged to client superannuation funds. The Federal Court made orders freezing the assets of Valvo and the company, restrained him from leaving Australia and required him to surrender his passport. 
He was scheduled to appear before the court on 29 September 2023.

September

Former van Eyk chief executive, Mark Peter Thomas, was permanently banned by ASIC over dishonestly using his position as the director of Blueprint Investment Management and engaging in dishonest conduct.

Last November 2022, he was sentenced in the NSW District Court to one year and three months’ imprisonment to be served by way of an Intensive Correction Order, including 250 hours of community service for using his position as a director dishonestly with the intention of directly or indirectly obtaining an advantage for himself. This followed his guilty plea to charges of breaching director duties on 31 May 2022.

Meanwhile, Mark Sebo, a Perth adviser who stole over $1 million from his clients to fund a gambling addiction received a five-year prison sentence, which will be backdated so he will be eligible for parole after three years.
Sebo had pleaded not guilty to the accusations of making 36 transactions over a 10-day period in July 2019 from his clients’ self-managed superannuation funds. This was then transferred into his online accounts with BetEasy, CrownBet and Ladbrokes as well as his personal account.

Rounding up the quarter was former Skynet adviser Terence Rio Nugara, who had been permanently banned by ASIC in April. He appeared in the county court of Victoria facing a maximum penalty of 20 years’ jail for obtaining financial advantage by deception, allegedly spending the money on race cars, boats and helicopters. He is expected to be sentenced on 5 October 2023.