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20-292MR Sterling Income Trust Responsible Entity and its Managing Director penalised
The Federal Court in Western Australia has found Theta Asset Management Ltd (In Liquidation) (Theta) and its Managing Director Mr Robert Marie contravened the Corporations Act on multiple occasions in authorising the issue of five defective Product Disclosure Statements for the Sterling Income Trust.
The Court has ordered Theta to pay a penalty of $2,000,000 with respect to the declarations of contravention and ordered Mr Marie to pay a penalty of $100,000. Mr Marie will also be disqualified for four years from managing corporations. ASIC will not seek recovery of the penalty against Theta, as doing so would decrease the funds available for distribution by the Liquidator of Theta to its creditors.
ASIC issued proceedings against Theta and Mr Marie on 11 December 2019. The Court found that Theta breached the Corporations Act and failed to comply with its duties as a responsible entity.
The Court also found that Mr Marie contravened the Corporations Act and failed to comply with his duties as a managing director of Theta.
Theta and Mr Marie admitted the contraventions in a Statement of Agreed Facts and Admissions filed with the Court along with joint submissions for declarations, civil penalties and the disqualification order to be imposed.
The Hon Justice McKerracher noted in handing down his judgment that the circumstances involved catastrophic losses sustained by investors.
ASIC Commissioner Cathie Armour said ‘The Federal Court outcome sends an important deterrent message to other responsible entities, as well as to those entrusted to act as gatekeepers, to ensure they comply with their legal obligations.
‘ASIC will take action to hold gatekeepers to account’.
In total, between 20 May 2016 to 30 April 2018, $16,749,974 was raised from retail investors pursuant to the defective Product Disclosure Statements.
ASIC’s investigation into conduct by entities and officers within the Sterling Group of companies continues.
The Court’s reasons for decision will be published by the Court in due course.
Of the 101 consumers who entered into Sterling New Life Leases, 63 of those Lessees invested in the Sterling Income Trust to generate funds to cover their rental expenses under such Leases. The remaining 38 Lessees did not invest in that Trust, rather they invested in Preference Shares offered by companies within the Sterling Group of Companies.
ASIC provides updates on its ongoing Sterling Group investigation at www.asic.gov.au/sterling
Following the lodging of joint submissions by the parties and a minute of consent orders, on 16 February 2021 the Court vacated orders 6 and 13(b) of the original orders made on 19 November 2020. The vacating of these two orders has no impact on the other orders, penalties and declarations made by the Court on 19 November 2021.
The vacated orders 6 and 13(b) were declarations that Theta had contravened s 1041H(1) of the Corporations Act, including a sub-paragraph stating that Mr Marie had failed to take all necessary steps to ensure that Theta complied with s 1041H(1). The joint submissions lodged by the parties drew the attention of the Court to s 1041H(3)(c) of the Corporations Act, which excludes the operation of 1041H(1) to the making of each of the representations in the Product Disclosure Statements.