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18-048MR ASIC accepts enforceable undertakings from two directors
ASIC has accepted enforceable undertakings (EUs) from Sydney-based directors Frank Tearle and Justin Epstein following an investigation of their conduct over an application for an Australian financial services (AFS) licence.
Mr Tearle and Mr Epstein were directors of both One Investment Services Pty Ltd (OIS) and a related entity One Investment Group Pty Ltd (OIG).
ASIC's investigation found:
- in March 2015, OIS applied for an AFS licence
- in August 2015, a sale agreement was entered into to sell OIS for $150,000 to a third party, and that Mr Tearle and Mr Epstein were aware of this. One condition of the sale was that OIS was granted an AFS licence
- on 16 September 2015, ASIC granted an AFS licence to OIS;
- neither Mr Tearle nor Mr Epstein had advised ASIC of the proposed sale of OIS, and
- on 24 September 2015, OIS was sold to an unrelated third party, which changed the name of the company to IMS FX Services Pty Ltd (since deregistered)
In February 2016, ASIC cancelled the IMS FX Services (formerly OIS) AFS licence on the grounds that the licence application lodged by OIS had been materially misleading.
ASIC was concerned that both Mr Tearle and Mr Epstein may have contravened their directors' duties under section 180 of the Corporations Act because they:
- failed to inform ASIC of the proposed sale of OIS while an AFS licence application for OIS was under assessment by ASIC
- may have permitted potentially misleading information to be submitted on behalf of OIS in support of the application
- may have known that information relating to the potential sale of OIS while a licence application was under assessment would be material to the application, and
- knew, or should have known, that providing misleading information to ASIC during a licence application could result in the subsequent suspension or cancellation of the licence.
Under their EUs, Mr Tearle and Mr Epstein have agreed to:
- not take on roles as responsible managers in relation to a financial services business for a period of six to twelve months
- remove themselves from the AFS licence application process for a period of two years
- ensure any entity of which either is a director to submit to additional compliance measures over documents submitted to ASIC for a period of two years
- for the next two years to notify ASIC in writing if either becomes aware that an agreement has been entered that may result in the change of ownership of any entity of which either is a director, and to provide relevant information about the prospective purchaser to ASIC
- complete 30 hours of training each within a 12-month period, and
- each make a voluntary contribution of $100,000 to The Ethics Centre.
'ASIC Deputy Chair Peter Kell said, 'Any person seeking to obtain an AFS licence must submit an application that accurately reflects the circumstances, as well as the financial services business the applicant intends to carry on under the licence.'
'Applicants must remember that any material change in circumstances concerning the licence application must be disclosed to ASIC so it can make a fully informed decision.'
In 2016, following the cancellation of its licence, IMS FX Services applied to the Administrative Appeals Tribunal (AAT) for a review of ASIC's decision to cancel its AFS licence. IMS FX Services also sought interim orders to keep the cancellation confidential and not be recorded in the public AFS licence register.
IMS FX was unsuccessful in its application to the AAT and subsequently withdrew its application for review of ASIC’s decision. As a result, the AAT dismissed the application (see 16-284MR).