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Monday 19 April 2021

21-076MR ASIC secures 20-year ban for Mayfair 101 director James Mawhinney from fundraising and promoting investment products

The Federal Court has restrained Mayfair 101 director James Mawhinney from promoting and raising funds through financial products for 20 years following proceedings brought by ASIC on 7 August 2020.

The Mayfair 101 Group offered investments in multiple financial products including M Core Fixed Income Notes (Core Notes), M+ Fixed Income Notes (M+ Notes), the IPO Wealth Fund, Australian Property Bonds and IPO Capital. The companies that offered the Core Notes and the IPO Wealth Fund are in liquidation and redemptions in the remaining products have been suspended since March 2020. Approximately $211 million is owing to Mayfair 101 Group investors.

Justice Anderson found Mr Mawhinney has been ‘involved in multiple contraventions’. Mr Mawhinney’s conduct can be characterised as ‘serious, incompetent and reckless and displaying a propensity for conduct in disregard of the requirements of financial services laws.’

His Honour was satisfied that there is a high likelihood that Mr Mawhinney, or entities controlled by him, will engage in similar conduct if not prevented by the Court from doing so. His Honour found ‘Mr Mawhinney’s conduct can accurately be described as reprehensible conduct which demonstrates a complete disregard for financial services laws and, as a consequence, places the public at great risk of financial loss should Mr Mawhinney not be restrained by the form of injunction sought by ASIC.’

Justice Anderson found Mr Mawhinney engaged in conduct that entailed ‘inherently problematic, risky and fatally flawed’ investment schemes in relation to the IPO Capital, Core Notes, M+ Notes and IPO Wealth Fund products. His Honour also found Mr Mawhinney ‘has expressed no contrition or remorse for the very significant loss of investors’ funds’.

His Honour also found Mayfair Wealth Partners, which promoted the Australian Property Bonds, took $100,000 from an investor without issuing the investor with the product or contacting the investor. Justice Anderson noted that ‘such conduct is reprehensible. No competent, fair or reasonable financial services provider takes money from an investor without having proper administrative procedures in place to ensure the relevant product is issued to the relevant investor.’

The Court restrained Mr Mawhinney (himself, or through any company of which he is an officer or shareholder) from advertising investments and seeking or accepting funds from the public in connection with any financial product, for 20 years. The injunctions will prevent Mr Mawhinney from advertising and raising further funds through both the existing Mayfair 101 products as well as any new financial products in future.

The Court also restrained Mr Mawhinney from removing from Australia any assets acquired with funds received from the public for investments in financial products for 20 years, without a court order.

This follows the 23 March 2021 decision of the Federal Court that found that companies in the Mayfair 101 Group made statements that were false, misleading or deceptive in advertisements for its debenture products (21-055MR). A penalty hearing for that proceeding has been listed for 20 July 2021.

ASIC Deputy Chair Karen Chester said ‘ASIC has succeeded in its cases against both Mayfair 101 and Mr Mawhinney, after a successful outcome in the Federal Court in March this year on misleading and deceptive advertising.

‘These are large investor losses, approximately $211 million, on the back of multiple product failures across the Mayfair 101 Group. This action is one of several under ASIC’s ‘True to Label’ project targeting investment managers and issuers of other financial products who have lured unsophisticated investors into high risk products via misleading marketing.

‘This case demonstrates that ASIC’s true to label expectations are enforceable. It also demonstrates ASIC is both willing and able to take action not only against the companies involved but also their senior executives. Justice Anderson’s decision makes clear why ASIC brought this action and that the business models for these products were flawed from the outset. The responsibility for the losses and the egregious harm to investors is, as the judgment makes clear, all down to the contumelious actions of Mr Mawhinney.’

‘In Justice Anderson’s decision, we hear loud and clear the voices of eight Australian investors who’ve lost hundreds of thousands of hard-earned savings. The average age of those eight voices is a retirement age of 67 years, beginning with the voice of one young 29-year-old investor through to the voice of an 84-year-old gentleman. Banning Mr Mawhinney from offering financial products for two decades matters for the many other investors that Mr Mawhinney may otherwise have lured into these risky investment products.’

Mr Mawhinney was ordered to pay ASIC’s costs of the application for the injunction.

ASIC’s investigation into Mr Mawhinney’s conduct is continuing.

Download

Judgment

Background

On 29 January 2021, the Federal Court wound up M101 Nominees Pty Ltd, which issued the Core Notes, on just and equitable grounds and appointed Said Jahani and Philip Campbell-Wilson as liquidators (21-012MR).

As part of the conclusion of these proceedings, the Court vacated interim orders made in August 2020 restraining Sunseeker Holdings Pty Ltd, of which Mr Mawhinney is a director, from dealing with the units in 14 trusts which hold property at Mission Beach and Dunk Island in Queensland. The units in those trusts are part of the security held on behalf of investors in the Core Notes. Receivers and managers have now been appointed over those units by the security trustee for the Core Noteholders. The Court also vacated interim orders made in August 2020 restraining Mr Mawhinney from leaving Australia.

On 13 August 2021, the Federal Court granted interim injunctions against Mr Mawhinney and appointed provisional liquidators to M101 Nominees (20-205MR).

On 17 September 2020, the Supreme Court of Victoria wound up the entities that operated the IPO Wealth Fund, on the application of the Fund’s trustee. ASIC appeared as a friend of the Court in that matter. Download the judgment.

ASIC’s Moneysmart website has information on investing, including on debentures, secured notes and unsecured notes.

ASIC has a dedicated webpage for Mayfair 101 Group investors.

Last updated: 26/04/2021 03:24