The Federal Court has found companies in the Mayfair 101 Group made statements that were false, misleading or deceptive in advertisements for its debenture products, following proceedings brought by ASIC in April 2020.
The Court found Mayfair Wealth Partners Pty Ltd and Online Investments Pty Ltd trading as Mayfair 101, M101 Nominees Pty Ltd and M101 Holdings Pty Ltd, engaged in misleading or deceptive conduct, and made false or misleading representations, by representing that:
- Mayfair’s debenture products were comparable to, and of similar risk profile to, bank term deposits, when Mayfair’s debenture products exposed investors to significantly higher risk than bank term deposits (Bank Term Deposit Representation);
- the principal investment would be repaid in full on maturity, when investors might not receive capital repayments on maturity, or at all, as Mayfair could elect to extend the time for repayment for an indefinite period of time; and
- Mayfair’s debenture products were specifically designed for investors seeking certainty and confidence in their investments and therefore carried no risk of default, when there was a risk that investors could lose some, or all, of their principal investment.
The Court also found Mayfair 101 and M101 Nominees engaged in misleading or deceptive conduct and made false or misleading representations by representing that the M Core Fixed Income Notes were fully secured financial products, when funds invested were:
- lent to a related party and not secured by first-ranking, unencumbered asset security or on a dollar-for-dollar basis or at all;
- used to pay deposits on properties prior to any security interest being registered; and
- used to purchase assets that were not secured by first-ranking, unencumbered asset security.
In his judgment, Justice Anderson found that the Bank Term Deposit Representation ‘was misleading or deceptive and created a false and misleading impression that the Mayfair Products were comparable to, and of similar risk profile to, bank term deposits… In light of the evidence relied on by ASIC, the Mayfair Products are not comparable to, or a proper alternative to, bank term deposits.’
Justice Anderson noted, in relation to the use of sponsored link internet advertising, that ‘it is tolerably clear that the Defendants’ marketing strategy was addressed to persons searching for a term deposit in order to divert them to the Defendants’ websites.’
Justice Anderson also stated ‘I am satisfied that the Mayfair Products have been, in fact, designed by the Defendants to produce a result which is uncertain for investors and could not on any reasonable view be described as an investment with no risk of default.’
Justice Anderson found that ‘Mr Mawhinney was the directing mind and will, and the ultimate beneficiary, of each of the Defendants’.
ASIC Deputy Chair Karen Chester said ‘ASIC’s success in Court today demonstrates firms need to do the right thing by their investors, even when they are wholesale investors. They need to make sure they accurately describe their products when advertising. The Court has shown that Mayfair 101 engaged in misleading and deceptive conduct by claiming its products were comparable to bank term deposits, when they were not.
‘Our ‘True to Label’ project that we commenced in late 2019 identified 30 funds with over $10 billion across these funds, that are misleading investors through online advertising, especially when investors are seeking yield in a low interest rate economy. The online advertising is misleading by claiming to offer products that involve less risk, when in reality, investors could lose some or all of their investments. Advertisements also claimed investors could get their invested money out when they wanted but that was not the case. This case is a warning that ASIC will not only take action where investments are marketed as safer, lower risk, or more liquid when they are not, but when search engines are used in a misleading or deceptive way to entice investors to products they are not searching for.’
ASIC is seeking pecuniary penalties, injunctions and corrective advertising. A penalty hearing is yet to be listed by the Court.
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Background
Mayfair 101 promoted two debenture products to wholesale investors:
- M+ Fixed Income Notes, which are unsecured promissory notes issued by M101 Holdings Pty Ltd; and
- M Core Fixed Income Notes, which are secured promissory notes issued by M101 Nominees Pty Ltd (in liquidation).
Mayfair 101 used sponsored link internet advertising through Google AdWords and Bing Ads, so that the websites for Mayfair’s debenture products appeared as sponsored links when consumers searched for “bank term deposit” or “term deposit” online.
Mayfair’s promotional material also used words such as:
- “term deposit alternative”;
- “term investment” and “fixed term”;
- “certainty” and “confidence”; and
- “first-ranking”, “unencumbered” and “dollar-for-dollar” security in relation to the secured promissory notes.
ASIC commenced proceedings on 3 April 2020 (20-080MR) and obtained interim injunctions restraining promotion of the Mayfair debenture products on 16 April 2020 (20-092MR).
In separate proceedings commenced by ASIC against the Mayfair 101 Group and its director James Mawhinney, on 13 August 2020, the Federal Court appointed provisional liquidators to M101 Nominees and made interim injunctions against Mr Mawhinney (20-205MR). On 29 January 2021, the Court ordered that M101 Nominees be wound up (21-012MR).
Judgment is reserved by the Court in ASIC’s application for permanent injunctions to restrain Mr Mawhinney from advertising and soliciting funds in connection with any financial product.
ASIC’s Moneysmart website has information on investing, including on debentures, secured notes and unsecured notes.
ASIC has established a dedicated webpage for Mayfair 101 investors.
Editor's note:
On 26 March 2021, this media release was changed to delete references to Mayfair Wealth Partners Pty Ltd trading as Mayfair Platinum. ASIC has removed the references due to orders made by the Federal Court in June 2020 restraining Mayfair Wealth Partners Pty Ltd from using the word ‘Platinum’ in its trading name.
Editor's note 2:
On 26 March 2021, the matter was listed for a case management hearing on 6 April 2021.
Editor's note 3:
On 1 April 2021, the case management hearing listed for 6 April 2021 was vacated, and the Court instead made timetabling orders on the papers. The matter has been listed for a penalty hearing on 20 July 2021.
Editor's note 4:
On 30 June 2021, a case management hearing was held before Justice Anderson. The penalty hearing listed for 20 July 2021 was vacated and re-listed for 29 and 30 September 2021.
Editor's note 5:
On 30 September 2021, the penalty hearing was adjourned to 4 October 2021.
Editor's note 6:
The penalty hearing concluded on 5 October 2021. Judgment is reserved.
Editor's note 7:
On 22 December 2021, the Court delivered its judgment on penalty (21-364MR).