VKK Investments Unit Trust - frequently asked questions
1. Why has ASIC commenced the proceedings?
ASIC commenced proceedings on 11 July 2017 in the Federal Court of Australia against Gem Management Group Pty Ltd (Gem).
ASIC understands that Gem has been the trustee and operator since May 2010 of a land banking scheme known as the VKK Investments Unit Trust (VKK Trust), which owns land located at 64 Hutton Road, Keysborough in Victoria.
The scheme has raised around $22 million from approximately 125 investors, for the purpose of financing the purchase of the Keysborough land and efforts to rezone the land.
ASIC alleges that the VKK Trust constitutes a managed investment scheme which has not been registered, in contravention of the Corporations Act 2001. ASIC also alleges that Gem, which does not hold an Australian Financial Services licence, has breached the Act by operating an unregistered managed investment scheme.
ASIC has commenced proceedings to protect the interests of investors in the scheme and to address what ASIC alleges constitutes substantial and continuing non-compliance with investor-protection obligations in the Act. ASIC's allegations also concern the following matters:
- the uncertain financial position of the scheme, which does not appear to have sufficient funds to repay existing liabilities or meet future expenses;
- the uncertain prospects of any rezoning of the Keysborough land in the near future;
- the adequacy of information provided to investors both at the time of their investment and subsequently;
- the apparent conflict of interest resulting from the loan arrangements in place between Gem and a lender controlled by one of Gem’s directors;
- the lack of direct contact between Gem and many of the investors, and reliance having instead been placed on 'lead' investors to circulate information;
- the failure of Gem to take steps to bring the scheme into compliance with the requirements of the Act, despite having been aware of those requirements and their application to the scheme; and
- Gem having continued until recently to raise funds from investors in the scheme notwithstanding having been notified by ASIC of its concerns.
2. What orders does ASIC want the Court to make?
ASIC is seeking orders from the Court for the winding up of, and appointment of liquidators to, each of Gem and the scheme.
You can view a copy of the originating process filed by ASIC to commence its proceeding here.
3. Will investors receive a refund?
ASIC is not seeking compensation or refunds for investors in this proceeding. However, if the Court orders the winding up of both the scheme and Gem, there may be a return to investors as part of the liquidation process. The realisation of assets and any distribution to investors will be undertaken by the liquidator appointed by the Court.
ASIC's guide to the liquidation process may assist investors. See Information Sheet 45 Liquidation: a guide for creditors (INFO 45).
4. What rights do investors have?
ASIC is unable to advise investors in relation to any rights they may have in relation to ASIC's application. If investors wish to be represented at the hearing of ASIC's application, then they should seek legal advice. Investors may also wish to seek independent legal and/or financial advice in relation to their investment in the scheme.