ASIC has made submissions to the Federal Court in relation to orders it was seeking in its civil action involving ActiveSuper and others.

ASIC made the submissions on 8 May 2015 in the Federal Court in Brisbane.

ASIC is seeking declarations of contravention and banning orders ranging from permanent to 7.5 years, against Gold Coast businessman Craig Gore and other individuals from providing financial services, following their involvement in the misuse  of more than $4 million raised from self-managed superannuation fund (SMSF) investors.

ASIC’s submissions follows Federal Court judge Richard White ruling in April 2015 that Mr Gore, several other parties and financial services businesses, including Queensland-based ActiveSuper and Royale Capital contravened sections of the Corporations Act or were knowingly concerned in those contraventions.

ASIC’s investigation into the group of individuals and businesses began in November 2011, and launched civil proceedings in 2012 (refer: 13-054MR and 12-161MR). The companies raised $4.75 million from more than 200 SMSF investors, and the scheme aimed to raise at least $20 million before ASIC intervened.

ASIC’s investigation looked at the advice given to Australian investors to establish a SMSF and invest money in a share scheme involving offshore entities and investment in real estate.

The judgment confirmed ASIC’s view of the law, namely that those who promote and make recommendations to investors about establishing an SMSF or using an existing one and recommend, facilitate or arrange for the investors to acquire or dispose of superannuation assets, including interests in deposit and payment accounts, are carrying on a financial services business for which they must have an Australian financial services (AFS) licence.

ASIC Commissioner Greg Tanzer said, ‘We will not tolerate behaviour that puts at risk the interests of SMSF members, including unlicensed conduct and false and misleading activity.’

Commenting particularly on Mr Gore’s involvement, Mr Tanzer added, ‘ASIC submitted that Mr Gore’s conduct was the most egregious. In his judgment delivered on 14 April 2015, Justice White found that Mr Gore’s purpose in establishing a share scheme offshore was to avoid compliance with the Australian regulatory regime.

‘ASIC will act to ensure those who deliberately deceive investors or misuse investors’ money for their own personal benefit are brought to account.

‘The experience of the investors in this matter, who have lost in the order of $4.5 million, should also serve as a timely reminder to SMSF investors to understand the risks associated with do-it-yourself super and their obligations as trustees. Investors need to do their homework, check who they are dealing with and remember SMSFs do not have access to compensation arrangements in the event of theft or fraud. There can also be significant tax penalties for those trustees of SMSFs who get it wrong.’

On 8 May 2015 Justice White has reserved his decision on disqualification and banning orders.

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ASIC’s submissions to the Federal Court in Brisbane on final orders

ASIC is seeking the following orders:

• Craig Gore - permanent banning from providing financial services.
• Marina Gore - permanent banning from providing financial services.
• Mark Adamson - 10 year banning from providing financial services (by consent).
• Jason Burrows - 10 year banning from providing financial services and 10 year disqualification from managing companies (by consent).
• Jeffrey George - permanent banning from providing financial services.
• Justin Gibson – 7.5 years banning from providing financial services and 7.5 year disqualification from managing companies (by consent).

Background

ASIC alleged multiple contraventions of financial services laws by Royale Capital, ActiveSuper and associated individuals and companies. ASIC’s concerns included:

• unlicensed provision of financial services
• failure to provide disclosure documents to investors
• cold calling practices
• misleading and deceptive conduct, and
• distribution of investor funds to third parties without disclosure to investors.

Justice White handed down his judgment on 14 April 2015. Read the judgment here. Note that the allegations made by ASIC against Graeme Stonehouse were found not to be proven.

Royale Capital and Mr Gibson, who were both absent from the trial, reached agreement with ASIC shortly before the hearing on 8 May 2015 as to the declarations and injunctions to be made in respect of the allegations against them.