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21-364MR Mayfair 101 Group to pay $30 million penalty for misleading advertising
The Federal Court has ordered four companies in the Mayfair 101 Group to pay a combined penalty of $30 million for misleading advertising.
In March 2021, 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 when promoting the M+ and M Core Fixed Income Notes (21-055MR).
Mayfair 101 Group products were advertised in newspapers, on websites and via Google search advertising, when potential investors searched for terms such as ‘bank term deposits’ and ‘best term deposit’.
ASIC Deputy Chair Sarah Court said ‘This penalty makes clear that firms must do the right thing by their investors, irrespective of whether they are wholesale or retail investors. Failing to accurately advertise financial products can result in significant penalties for firms.’
The Court found that the Mayfair companies represented that:
- the Notes were comparable to, and of similar risk profile to, bank term deposits, when they were of significantly higher risk,
- the Notes carried no risk of default, when in fact there was a risk that investors could lose some, or all, of their principal investment,
- the principal investment would be repaid in full on maturity, when this might not occur because Mayfair could extend the time for repayment for an indefinite period, and/or
- the M Core Notes were fully secured products when they were not.
The Court imposed the following penalties:
- Mayfair Wealth Partners: $10 million
- M101 Holdings: $8 million
- M101 Nominees (in liquidation): $8 million
- Online Investments: $4 million
James Mawhinney is the director of each of the Mayfair companies. In April 2021, the Federal Court restrained Mr Mawhinney from advertising and raising funds through financial products for 20 years (21-076MR).
In handing down the decision, Justice Anderson found that, ‘the Defendants deliberately mislead investors into investing in the Mayfair Products under the belief that they would be of low risk when in fact the Mayfair Products were highly speculative and carried very substantial risk.’
His Honour also found that Mr Mawhinney had shown no remorse ‘for the loss and harm caused to investors in the Mayfair Products.’
The Court also permanently restrained the companies from using certain words and phrases (such as ‘term deposit’ and ‘certainty’) in any future advertising.
The Mayfair 101 Group offered investments in multiple financial products including the M+ and M Core Notes, the IPO Wealth Fund, Australian Property Bonds and IPO Capital. The companies that offered the M 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.
On 6 April 2020, the Federal Court made interim orders restraining the promotion of the M+ and M Core Notes (20-092MR).
On 13 August 2020, the Federal Court granted interim injunctions against Mr Mawhinney and appointed provisional liquidators to M101 Nominees, which issued the M Core Notes (20-205MR). On 29 January 2021, the Federal Court wound up M101 Nominees on just and equitable grounds, and appointed Said Jahani and Philip Campbell-Wilson as liquidators (21-012MR).
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.
On 15 November 2021, ASIC commenced proceedings against Mr Mawhinney and related entities for contempt of court (21-302MR).
ASIC’s investigation into Mr Mawhinney’s conduct is continuing.
ASIC’s Moneysmart website has information on investing, including on debentures, secured notes and unsecured notes.
On 21 January 2022, the Federal Court made orders giving effect to the reasons for judgment delivered on 22 December 2021, and also ordered that the operation of the orders be stayed pending the determination of any appeal filed by a defendant. On 24 January 2022, ASIC was served with a Notice of Appeal filed by Mayfair Wealth Partners Pty Ltd, M101 Holdings Pty Ltd and Online Investments Pty Ltd against the judgments delivered on 23 March 2021 (liability judgment) and 22 December 2021 (penalty judgment).
Editor's note 2:
Matters relating to the appeal are listed for mention in the Federal Court on 8 February 2022.
Editor's note 3:
A case management hearing in relation to the appeals is listed for 24 February 2022.
Editor's note 4:
The appeal has been listed for hearing on 22 August 2022, for an estimate of five days.