ASIC has banned Mr Michael Roger O’Sullivan of Sydney from managing corporations for five years and from providing financial services for seven years. The ban follows an ASIC investigation which found Mr O’Sullivan breached his duties as a director and failed to comply with financial services laws.

Mr O’Sullivan was the managing director of Provident Capital Limited (Provident Capital) from 25 May 1998 to 28 January 2014. Provident Capital went into receivership on 3 July 2012 and into liquidation on 24 October 2012.

ASIC suspended Provident Capital’s Australian financial services licence on 15 October 2012.

ASIC’s investigation found Mr O’Sullivan:

• failed to exercise due care and diligence in the management and recording of the largest loan made by Provident Capital through its Fixed Term Investment Portfolio
• caused Provident Capital to make misleading statements to ASIC and Australian Executor Trustees Limited
• caused Provident Capital to issue a Debenture  Prospectus in December 2010  to raise funds from the public which contained misleading statements, and
• used his position improperly to gain financial advantages for himself and for a company of which he was formerly a director.

ASIC Commissioner John Price said, ‘Directors have a responsibility to ensure that statements made to investors are true and reliable. Failing to meet this simple obligation undermines confidence and trust in the corporate and financial services communities.’

‘Managing companies and providing financial services requires compliance with important obligations. ASIC will remove those who fail to meet these obligations,’ Mr Price said.

Mr O’Sullivan has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.

ASIC’s investigation is continuing.

Background

The five year period for which Mr O’Sullivan was banned from managing corporations is the maximum period of disqualification that ASIC can impose under section 206F of the Corporations Act 2001.

Provident Capital issued debentures to retail investors through their Fixed Term Investment Portfolio and advanced the debenture funds to third party borrowers, including property developers, on a first mortgage basis.

Provident Capital also operated a mortgage fund under a wholesale facility with Bendigo and Adelaide Bank and two managed investment schemes.

On 29 June 2012, on an application by the Australian Executor Trustees Limited, the trustee for Provident debenture holders, the Court ordered that receivers be appointed to Provident. ASIC appeared as a ‘friend of the court’ in these proceedings.

When Provident Capital went into liquidation on 24 October 2012 over 3,000 Provident debenture holders were owed approximately $130 million.

Provident’s receivers (PPB Advisory) have estimated that the likely return to debenture holders will be in the range of $0.17 to $0.19 in the dollar.

Editor's note

On 23 February 2015 Mr O'Sullivan lodged an appeal against his bannings with the AAT.

Editor's note 2:

Following a hearing on Friday 27 March 2015, the AAT granted Mr O'Sullivan an order staying the operation of  the disqualification order (206F of the Corporations Act) . The stay is until the  AAT hears and determines the review of the decision.

The stay does not affect the order banning Mr O'Sullivan from providing financial services for 7 years (920A of the Corporations Act).

Editor's note 3:

Mr O'Sullivan's AAT  appeal hearing was heard on 14,15 and 16 July 2015. There will two further hearing days, the first on 24 August 2015 and the final on 27 October 2015.

Editor's note 4:

On 15 October 2015, the Registrar made orders to vacate the hearing from 27 October 2015 until 17-18 November 2015.

Editor's note 5:

The hearing concluded on 17 November 2015, the decision was reserved.

Editor's note 6:

On 2 May 2017 the AAT upheld ASIC's decision to disqualify Mr O'Sullivan from managing corporations for five years and from providing financial services for seven years. 

The AAT qualified the five-year disqualification decision by permitting Mr O'Sullivan to remain as a director of three private companies, provided that those companies only involve activities relating to Mr O'Sullivan's immediate family.

Editor's note 7:

On 30 May 2017 Mr O'Sullivan lodged an appeal against the AAT's decision in the Federal Court. The hearing of the appeal has been listed for 7-8 February 2018.

Editor's note 8:

On 7 February 2018, Mr O'Sullivan's appeal was heard by Justice Perram of the Federal Court. Judgment has been reserved.

Editor's note 9:

On 7 March 2018, Justice Perram of the Federal Court delivered his decision on Mr Michael Roger O'Sullivan's appeal of the Administrative Appeals Tribunal's (AAT)decision (refer: 18-078MR).

The Federal Court ordered that the AAT's decision of 2 May 2017 be set aside for the reason that the AAT had denied Mr O'Sullivan procedural fairness. However, the Federal Court found in favour of ASIC in dismissing Mr O'Sullivan's challenge to the jurisdiction of the AAT and ASIC to disqualify Mr O'Sullivan from managing corporations under s 206F of the Corporations Act 2001 (Cth). 　

The matter was remitted by the Federal Court to the AAT to be re-determined according to law.　

A copy of the Federal Court's decision can be found here.

Editor's note 10:

The AAT has upheld ASIC’s 2015 decision to ban Mr O’Sullivan from providing financial services for seven years and to disqualify him from managing corporations.

The AAT, which handed down its decision on 27 January 2022, reduced the period of Mr O’Sullivan’s disqualification from managing corporations from five years to two years and nine months, which will be in place until 20 September 2024. The seven-year ban on him providing financial services will be in place until 16 February 2022.