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18-236MR ASIC succeeds in obtaining orders against Linchpin Capital Group and Endeavour Securities (Australia) and appointment of Receivers
The Federal Court of Australia has made interim orders in proceedings brought by ASIC against Linchpin Capital Group Ltd (Linchpin) and Endeavour Securities (Australia) Ltd (Endeavour). Linchpin and Endeavour operate two managed investment schemes. Both schemes are called 'Investport Income Opportunity Fund.'
On 7 August 2018, Justice Derrington found that, on the evidence filed to date, Linchpin had engaged in serious breaches of the Corporations Act and that the Court could not have any confidence that Linchpin and its directors would act in the interests of the fund operated by Linchpin. His Honour stated:
‘The manner in which the (Linchpin) Fund has been operated is also a matter of some concern given that the bulk of the funds have been invested in related party loans with no registered security… and the circumstances indicate this is likely to have given rise to breaches of trust and fiduciary duty’.
The Court also found that there was a prima facie case that Endeavour had engaged in serious and persistent contraventions of the Corporations Act and breaches of duty towards members of the fund operated by Endeavour. His Honour further stated that:
‘It appears that a substantial portion of the assets of the (Endeavour) Fund have been applied by it in contravention of the Act… and the transactions entered into by Endeavour required the approval of the members of the fund and that has neither been sought nor obtained.’
The Court ordered that:
- David Orr and Jason Tracy of Deloitte be appointed as Receivers over:
(i) the assets of Linchpin;
(ii) any assets held by Endeavour in its capacity as responsibility entity of the Investport Income Opportunity Fund;
- Linchpin and Endeavour are restrained from dealing with assets or investor funds;
- Linchpin is restrained from operating the Investport Income Opportunity Fund and providing financial services advice, dealing in or promoting financial products or carrying on any financial servcices business; and
- Endeavour is restrained from operating the Investport Income Opportunity Fund or carrying on any financial services business in connection with that scheme.
A copy of the judgment can be found here. These orders were made pending a final hearing into the conduct of Linchpin and Endeavour.
The Court adjourned the matter for a case management hearing on 14 August 2018 at 10:15am. The Receivers are to provide a report to the court by 4 September 2018 regarding the two schemes operated by Linchpin and Endeavour.
On 14 August 2018, the Court made orders setting out a timetable for delivery of concise statements and evidence by the parties. The matter is listed for a further Case Management Hearing on 19 October 2018.