ASIC today reminded investors that purporting to transfer securities to fictitious persons is an offence.
In light of speculation that transfers of particular securities involving false names have been used in the attempt to avoid liabilities, ASIC considers that fictitious transactions are not legally valid and do not transfer obligations.
Subsection 1308(2) of the Corporations Act 2001 provides that a person who makes, or authorises the making of, a statement in certain documents that to the person’s knowledge is false or misleading in a material way is guilty of an offence.
A document making a transfer of securities, including units in listed trusts or partly-partly paid securities, would be covered by this provision. This is the case regardless of whether the document is lodged through a stockbroker or directly with the relevant registry.
ASIC Chairman, Tony D’Aloisio said the accurate identification of share ownership through share registries is a fundamental aspect of market operation.
‘ASIC will investigate where it receives credible information that a transfer has been made to a fictitious person,’ Mr D’Aloisio said.
Transferring securities to fictitious persons may also give rise to civil liability under the prohibitions against misleading or deceptive conduct in section 1041H of the Corporations Act and section 12DA of the Australian Securities and Investments Commission Act 2001.
Background
An off-market transfer is where the ownership of securities (including interests in managed investment schemes) is transferred without putting them on the market. The transfer is typically done via private arrangement and undertaken through the lodgement of documents with the relevant registry.
The maximum penalty for an individual who contravenes s 1308(2) is a fine of $22,000 or imprisonment for 5 years or both. A body corporate may be fined up to $110,000. Subsection 1308(2) covers a very wide range of conduct.
Liability under ss 1041H and 12DA is civil only (not civil penalty). Remedies include compensation for any loss suffered as a result of the breach.