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18-336MR Man pleads guilty to misleading ASIC about shareholding
Mr John Lindsay Merity, of North Nowra, New South Wales, has pleaded guilty before the District Court of New South Wales to charges of giving false or misleading information to ASIC about shareholding.
The charges were brought following ASIC enquiries in 2009 and 2010 to identify those parties who had a relevant interest in 17,376,120 shares in Northwest Resources Limited (Northwest) that were held by Craigside Company Ltd (Craigside) and Broome Enterprises Ltd (Broome Enterprises). Both Craigside and Broome Enterprises were companies incorporated in the British Virgin Islands and operating from Hong Kong.
ASIC made the enquiries to ensure that the market was properly informed of the identity of all parties who had an interest in what was a substantial Northwest shareholding. Such information is essential for market transparency and ensuring that trading occurs in an informed environment.
During the course of those enquiries and in response to ASIC’s Directions to Disclose, Mr Merity, between 22 October 2009 and 5 November 2009 and again between 11 January 2010 and 16 January 2010, knowingly made false or misleading statements to ASIC by stating that he had no interest in the shares when, in fact, he did.
Mr Merity, 72, pleaded guilty to two counts of making false or misleading statements to ASIC contrary to s 1308(2) of the Corporations Act 2001. Each offence carries a maximum penalty of five years' imprisonment.
Following his plea, Mr Merity was ordered to deliver his passport to ASIC. He will be sentenced by the District Court of New South Wales at a later date.
The matter is being prosecuted by the Commonwealth Director of Public Prosecutions.
Northwest is an unlisted public company with Australian mining interests. Between December 2004 and August 2015, Northwest was listed on the Australian Securities Exchange.
In December 2011, ASIC obtained orders from the Federal Court of Australia restraining Craigside from disposing of, or exercising any votes or rights attached to, 15 million shares that it held in Northwest (11-303AD). At the time of those orders, Craigside’s parcel of shares represented approximately 11.46 per cent of Northwest’s issued capital.
In April 2014, ASIC obtained orders from the Court cancelling the 15 million Northwest shares held by Craigside (14-076MR). Those orders were made with Northwest’s consent and not opposed by Craigside. In seeking the orders, ASIC alleged that although Craigside was the holder of the shares, it did not have a relevant interest in them and that those that did had not disclosed that interest to Northwest, contrary to legislative requirements.
Under the Corporations Act, a person has a 'relevant interest' in shares if, among other things, they:
- are the holder of the shares;
- have power to exercise, or control the exercise of, a right to vote attached to the shares; or
- have power to dispose of, or control the exercise of a power to dispose of, the shares.
Editor's note 1:
On 14 December 2018, the District Court listed the matter for a hearing of disputed facts and sentence on 15 July 2019.
Editor's note 2:
On 15 July 2019, the matter was adjourned to 9 and 10 of December 2019 for disputed facts and sentencing hearing.
Editor's note 3:
The disputed facts and sentencing hearing concluded on 11 December 2019. The sentence will be delivered by Blackmore J on 14 February 2020.