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16-199MR ASIC commences proceedings against Macquarie Investment Management
ASIC has commenced proceedings in the Supreme Court of New South Wales against Macquarie Investment Management Ltd (MIML) as the responsible entity of the van Eyk Blueprint International Shares Fund (VBI Fund). The proceedings involve investments of $30 million made by the VBI Fund in 2012 into a Cayman Islands based fund, known as Artefact Partners Global Opportunities Fund (Artefact). The VBI Fund was one of the Blueprint series of funds of which van Eyk Research Pty Limited (now in liquidation) was investment manager, and MIML was responsible entity.
MIML has admitted to five contraventions of the Corporations Act and the parties have filed an Agreed Statement of Facts.
ASIC and MIML have agreed that MIML failed to comply with its duties as a responsible entity by:
- failing to adequately address risks associated with the decision for the VBI Fund to make 3 investments into Artefact between 6 July to 30 October 2012;
- allowing members to redeem or withdraw units from the VBI Fund when it was illiquid in contravention of the Corporations Act and the scheme's constitution between 15 June 2013 to 9 September 2013; and
- failing to make adequate and timely enquiries in relation to van Eyk’s monitoring of the VBI Fund’s investment in Artefact between 18 February 2013 and 21 July 2014 (including not making adequate and timely enquiries as to why a full redemption from Artefact had not been paid between 1 January 2014 to 21 July 2014).
The Court will hear joint submissions from ASIC and MIML as to the appropriate penalty amounts. The final penalty amount is a matter that will be determined by the Court.
On 1 August 2014, MIML suspended redemptions from the VBI Fund and three other funds due to their exposure to the VBI Fund. Between them these funds managed over $450 million.
On 15 August 2014, MIML terminated the VBI Fund, with unitholders owed around $30.9m relating to the Artefact investments. Since then, Artefact has repaid $20m to the VBI Fund. MIML recently paid the remaining approximately $10.9 million plus interest to unit holders (less fees and winding up costs) and expects to recover the majority of that amount from Artefact's liquidator. ASIC acknowledges the efforts made by MIML to have the investors' funds repaid.
ASIC has an ongoing investigation into van Eyk Research Pty Ltd, the entity MIML appointed as the investment manager of the VBI Fund. Van Eyk Research Pty Ltd went into liquidation in 2014.
Commissioner Greg Tanzer said, 'The Corporations Act places important obligations on responsible entities which protect the interests of investors. Those obligations require responsible entities to have a supervisory and monitoring role in relation to funds, even where external investment managers have been appointed. ASIC will take action against responsible entities when they fail to meet their obligations.'
The proceedings will be listed for directions on Monday 27 June 2016 and the parties will request an early hearing date from the Court.
ASIC has taken a number of actions to improve compliance by responsible entities and protect the interests of unit holders, investors and members (refer generally: 15-251MR).
Other current and past actions include:
- Five former directors of Australian Property Custodian Holdings were fined and 4 disqualified for breaching their directors' duties by making an illegal related party payment of more than $20 million, and failing to act in their unit holders best interests. The matter is currently subject to an appeal. (14-232MR)
- Five former executives of MFS Investment Management Limited were found liable for breaching their duties as officers of a responsible entity, following $143.5 million of unitholders’ money used to repay debts. (16-158MR).
- Following the collapse of Gold Coast-based fund manager LM Investment Management, ASIC is seeking financial penalties and banning orders against director Peter Drake and former directors. ASIC alleges Mr Drake used his position to gain an advantage for himself and former directors breached their duties by failing to act with the proper degree of care and diligence. (14-308MR).
- ASIC is seeking court orders to wind up Avestra Asset Management and has alleged that Avestra contravened its duties in relation to a number of managed investment schemes for which it is the responsible entity. ASIC alleges that Avestra borrowed money on an unsecured basis from the property of its schemes, and invested scheme property in entities and offshore funds connected to its directors without proper due diligence or regard for the interests of members. (15-256MR).
- On 5 November 2014, following action taken by ASIC, the High Court unanimously upheld a decision of the Full Court of the Federal Court of Australia that found Wellington Capital acted improperly in distributing shares in Asset Resolution Limited to unit holders in the Premium Income Fund, for which it acts as the responsible entity. Wellington did not consult with nor obtain the consent of unit holders prior to undertaking these transactions and acted beyond the powers set out in the Premium Income Fund constitution. (14-293MR).
On 24 June 2016, the matter was removed from the directions hearing list and is now listed for final hearing on 23 August 2016.