The Australian Securities and Investments Commission (ASIC) has obtained compliance and asset preservation orders from the Supreme Court of New South Wales against Elm Financial Services Pty Ltd (Elm), the holder of an Australian Financial Services licence, and its directors, Mr Dennis Howell Terracini, Mr Andrew Dennis Terracini and Mr Duncan Grant McCartney.

Mr Robert John Kay and Mr Howard Young, and six related companies are also defendants in the proceedings and are subject to these orders. The related companies are Elm Nominee Services Pty Ltd, Elm Management Services Pty Ltd, Elm Property Developments Pty Ltd, Fletcher Securities Pty Ltd, E Star Developments Redfern Pty Ltd and E Star Developments Surry Hills Pty Ltd.

The court orders, which were made by consent, restrain each of the defendants from dealing with funds received from investors in six investment schemes. The defendants are also restrained from dealing with assets acquired by the schemes.

The case has been stood over for further directions on 17 May 2004.

Background

ASIC has been investigating Elm’s role in promoting several in-house investment schemes over different periods dating back to 2001. The schemes include:

• the Elm Financial Services Stirling Apartments Debenture;
• the Elm Financial Services Port Heritage Debenture Note Issue;
• the Elm Property Developments Debenture Note Issue;
• the Elm Financial Services Unit Trust No 1; and
• the Elm Nominee Services Note.

These investments offered fixed rates of interest of ranging from 8.5 per cent to 20 per cent per annum. All the investments, except the Unit Trust, were unsecured. Investors’ funds were used by Elm or by companies associated with Elm for property developments and other purposes.

None of the schemes had disclosure documents registered with ASIC. ASIC alleges that advisers of Elm breached the Corporations Act by recommending these schemes to investors, who had limited investment experience. Approximately $20 million dollars was raised from retirees and other investors.

ASIC also alleges that companies in the Elm group failed to repay investments upon maturity in three of the schemes. ASIC has received complaints from investors that the Elm group unilaterally extended maturity dates and recommended they roll over their investment rather than repay their funds.

ASIC is also concerned about a sixth scheme involving Promissory Notes, issued by Ann Street Mezzanine Pty Ltd to Elm. ASIC alleges that Elm illegally pooled investor funds and placed investments with Ann Street Mezzanine in its own name rather than in the names of the investors.