The court found that two directors received unsecured loans for personal use
The Federal Court has issued penalties totalling $390,000 against four current and former directors of Endeavour Securities (Australia) Ltd and Linchpin Capital Group Ltd, the responsible entities of managed investment schemes.
The court's decision in Australian Securities and Investments Commission v Daly (Penalty Hearing) [2024] FCA 3 follows the earlier findings that Endeavour directors, namely Ian Williams, Paul Raftery, and Paul Nielsen, and officer Peter Daly, had breached their duties as officers of a responsible entity of a registered managed investment scheme and did not act in the best interests of members.
Endeavour operated a registered managed investment scheme, the Investport Income Opportunity Fund, while Linchpin operated an unregistered managed investment scheme, which was also called the Investport Income Opportunity Fund.
In a previous decision, the court found that between 2015 and 2018, the directors and officers did not take all reasonable steps to ensure that Endeavour complied with its compliance plan, obtained member approval for related party loans and issued Product Disclosure Statements that complied with the law. The court also found that they failed to exercise care and diligence and act in the best interests of members of the Investor Income Opportunity Fund.
The court found that Daly and Raftery improperly used their positions by receiving unsecured loans from the unregistered Investport Income Opportunity Fund for their personal use. Daly received loans totalling $130,000, and Raftery took a $40,000 loan.
ASIC Deputy Chair Sarah Court said, "ASIC took this case because we believed the directors were not taking reasonable steps to comply with their compliance plan and obtain member approval for loans."
Nielson, Williams and Rafterty did not contest ASIC's case at trial and agreed to ASIC's penalty submissions. The Federal Court ordered Nielson and Williams to pay a $100,000 penalty and banned them from managing corporations for four years. The court ordered Raftery to pay a $40,000 penalty and banned him from managing a corporation for three years. Daly, who contested the case, was ordered to pay a $150,000 penalty and banned from managing a corporation for three years.
The penalties included an agreement by Nielsen, Raftery, and Williams to contribute $175,000 towards ASIC's costs. Daly was ordered to pay $175,000 and a further proportion of ASIC's costs associated with the contested hearings.
