In Australian Securities and Investments Commission v La Trobe Financial Asset Management Ltd  FCA 1417 the Federal Court of Australia ordered La Trobe to pay an aggregate pecuniary penalty in the amount of $750,000 in respect of contraventions of section 12DB(1) of the ASIC Act (misleading representations in financial services) by La Trobe’s advertising in newspapers, magazines and on websites and to pay ASIC’s costs fixed in the sum of $120,000.
La Trobe holds an Australian Financial Services Licence authorising it to operate registered managed investment schemes open to the public that hold deposits and lends pooled deposits on the security of mortgages for retail and wholesale clients. An interest in the Fund is a “financial product” within the meaning of section 12BAA of the ASIC Act.
Justice O’Bryan concluded that “the contravening conduct cannot be described as accidental or inadvertent. The conduct involved the deliberate use of financial product descriptions (48 hours, 90 days and capital stable) that conveyed a clear impression (with respect to the period in which funds may be withdrawn and the security of the capital invested) which, in the circumstances of the Fund, were incorrect.”
The court found that:
1.La Trobe contravened sections 12DA(1) and 12DB(1)(i) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) and section 1041H(1) of the Corporations Act 2001 (Cth) (Corporations Act) by representing, during certain periods:
(a) regarding advertisements on La Trobe’s website in respect of the 48 Hour Account (being the investment option in the La Trobe Australian Credit Fund (ASRN 088 178 321) (Fund) known as the “48 hour Account”, “Classic 48 hour Account” or “Classic Notice Account”);
(b) regarding advertisements in newspapers in respect of the 48 Hour Account;
(c) regarding advertisements on La Trobe’s website in respect of the 90 Day Account (being the investment option in the Fund known as the “90 Day Notice Account”); and
(d) regarding advertisements in newspapers in respect of the 90 Day Account,
that a person who invested funds in the 48 Hour Account or the 90 Day Account would be entitled to withdraw from the investment option within, respectively, 48 hours or 90 days of providing a withdrawal notice, whereas:
(a) while the Fund was liquid within the meaning of s 601KA of the Corporations Act, subject to its duties under the Corporations Act, the defendant had up to 12 months to satisfy a withdrawal notice in relation to either of those investment options; and
(b) had the Fund become not liquid, a member of the Fund invested in either of those investment options would have been entitled to withdraw only in accordance with any withdrawal offer made by the defendant.
2. La Trobe contravened sections 12DA(1) and 12DB(1)(e) of the ASIC Act and s 1041H(1) of the Corporations Act by representing:
(a) regarding advertisements on the defendant’s website; and
(b) regarding advertisements in Money magazine,
that any capital invested in the Fund would be “stable”, in the sense of there being no risk of substantial loss of that capital, whereas a person who invested in the Fund could substantially lose the capital invested.
The penalty comprised:
(a) an aggregate penalty of $400,000 in respect of the contraventions of s 12DB(1)(i) arising from the 48 Hour Account representation;
(b) an aggregate penalty of $200,000 in respect of the contraventions of s 12DB(1)(i) arising from the 90 Day Account representation; and
(c) an aggregate penalty of $150,000 in respect of the contraventions of s 12DB(1)(e) arising from the capital stable representation.
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Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.