An ASIC statement said the High Court had dismissed an appeal from Wellington Capital which tried to challenge the Federal Court after the court found it had acted “improperly” in distributing shares rather than cash from its Premium Income Fund (PIF).
ASIC said it took action against Wellington Capital since the regulator believed the firm acted beyond the powers set out in the PIF constitution by distributing Asset Resolution Limited (ARL) shares to PIF unit holders.
“On 5 September 2012, Wellington Capital announced that ARL had acquired $90.75 million in assets of the PIF, representing approximately 41 per cent of the assets of the PIF, in return for which the PIF acquired all issued shares in ARL,” a statement from ASIC said.
“Wellington Capital also announced that immediately after the issuing of shares to the PIF, Wellington took steps to have the ARL shares distributed to PIF unit holders. Wellington Capital did not consult with nor obtain the consent of unit holders prior to undertaking these transactions,” the regulator said.
ASIC’s initial action against Wellington Capital was dismissed by the Federal Court; however, the regulator then successfully appealed.
Following its successful appeal, ASIC commenced Federal Court proceedings in June 2013 in which the court found Wellington Capital had acted improperly in distributing shares in Asset Resolution Limited (ARL) to unit holders in the Premium Income Fund (PIF), for which it acts as the responsible entity.
ASIC Commissioner Greg Tanzer said the decision by the High Court to dismiss the appeal “validates” the regulator’s concerns with Wellington Capital’s conduct.
“The conclusion of this matter should also leave no doubt in the minds of responsible entities that ASIC expects them to exercise their powers in accordance with their constitution and the law,” Mr Tanzer said.
