The Federal Court has mandated that four current and former directors of Endeavour Securities (Australia) and Linchpin Capital Group, both in liquidation, collectively pay $390,000 in penalties, ASIC has reported.
The court found that the directors, Ian Williams, Paul Raftery, Paul Nielson, and Peter Daly (who was found to have served as an officer at Endeavour), had breached their duties as officers of a responsible entity of a registered managed investment scheme, failing to act in the best interests of members.
“ASIC took this case because we believed reasonable steps were not being taken by the directors to comply with their own compliance plan and obtain member approval for loans,” said Sarah Court, ASIC deputy chair.
The “penalties are significant and should act as a reminder to directors of responsible entities that operate managed investment schemes,” Court said.
While Nielson, Williams, and Raftery did not contest ASIC’s case and accepted penalty submissions, Daly contested the case. The penalties imposed are as follows:
Justice Elizabeth Cheeseman, in her penalty decision for Daly, noted his superficial acceptance of responsibility and lack of remorse, indicating that a higher penalty is warranted for specific deterrence.
The Federal Court previously found that between 2015 and 2018, the directors failed to ensure compliance with the compliance plan, obtain member approval for related party loans, and issue law-compliant Product Disclosure Statements. The court added that the directors have failed to exercise care and diligence as well as failed to act in the best interests of members of the Investport Income Opportunity Fund.
Daly and Raftery were also found to have improperly used their positions, receiving unsecured loans from the unregistered Investport Income Opportunity Fund for personal use. Daly obtained loans amounting to $130,000, while Raftery secured a $40,000 loan.
As part of the settlement, Nielson, Raftery, and Williams agreed to pay $175,000 each towards ASIC’s costs, while Daly was ordered to pay $175,000 plus a proportion of ASIC’s costs associated with contested hearings.
The judgment is available for download, and this development follows ASIC’s previous ban of the directors from providing financial services for a five-year period in November 2019. Endeavour Securities and Linchpin Capital Group, responsible for managed investment schemes, were both placed into liquidation in 2019.
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