ASIC has accepted an enforceable undertaking (EU) from Sydney-based registered liquidator, Adam Edward Patrick Farnsworth, after an ASIC review of several external administrations found he had failed to adequately discharge his duties. Mr Farnsworth is a partner of the firm Farnsworth Shepard.
The undertaking prevents Mr Farnsworth from practising as a registered liquidator for the next six months, except on the liquidation of Moore Australasia Pty Limited (In Liquidation). It takes into account that, since mid-April 2015, Mr Farnsworth has not accepted any appointments as a registered liquidator.
The undertaking also requires Mr Farnsworth:
- to have an independent quality reviewer, for four years after the end of the non-practice period, review all Mr Farnsworth's declarations of independence that arise from a specific referral source
- complete 40 hours of Continuing Professional Development within 12 months and a reporting course provided by ARITA, and
- engage a quality reviewer to conduct two quality reviews.
ASIC reviewed several of Mr Farnsworth's external administrations and found he had failed to adequately discharge his duties in that he:
- failed to recognise a relatively large value of referrals to him from one work referrer might lead to concerns about his independence and impartiality. He should not have accepted those appointments
- failed to make reasonable efforts to obtain the books and records of companies he externally administered as liquidator
- did not undertake investigations to the standard expected of a reasonably competent liquidator
- failed to highlight in a report to creditors, to the standard expected of a reasonably competent liquidator, that a person who referred work to Mr Farnsworth may have benefited from a voidable transaction
- should not have admitted various related-party proofs of debt for voting purposes, and
- did not document his adjudication of proofs of debt for distribution purposes.
Not each and every one of ASIC's views apply to all of the external administrations reviewed.
Following ASIC's intervention, Mr Farnsworth took steps to update his compliance procedures and complete the ARITA independence training course.
ASIC Commissioner John Price said: ‘Registered liquidators, must be, and must be seen to be, independent and impartial.
‘It is critical that creditors and the wider public have absolute confidence in liquidators acting, and being seen to act, independently and solely in the creditors’ interests.’
ASIC acknowledges Mr Farnsworth's cooperation.