Rural Victoria-based financial group Banksia Securities former managing director Patrick John Godfrey has been ordered to pay a pecuniary penalty and disqualified from managing corporations for five years.
Banksia Securities was an unlisted public group based in Kyabram, Victoria that raised money by issuing debentures and lending the funds to property investors and developers.
By October 2012, Banksia had raised around $663 million from 15,622 investors but by the end of the month collapsed and went into administration.
The Federal Court determined Mr Godfrey had contravened section 344(1) of the Corporations Act in four ways, according to a statement by ASIC.
Firstly, a number of financial reports in 2011 and 2012 were found to have failed to comply with accounting standards, nor did they provide a “true and fair view” of the non-bank lender’s financial position and performance given the disclosed amount of bad and doubtful debts.
Secondly, Mr Godfrey failed to “have or obtain a sufficient understanding” of the accounting standard requirements (AASB 139 Financial Instruments: Recognition and Measurement) in order to recognise or assess the “impairment” of investments made by Banksia.
Thirdly, his recommendations on the amount provided for bad and doubtful debts resulted in the failure of financial reports to provide a “true and fair view” of the company’s financial position.
Finally, Mr Godfrey was found to have “failed to take all reasonable steps to secure compliance by Banksia” with the relevant accounting standard AASB 139.
Commenting on the penalty and disqualification order, ASIC commissioner John Price said: “Mr Godfrey fell short of the standards required of him in this case.
“The importance of ensuring that the financial accounts of a company are reported in accordance with the law by complying with the correct accounting standards is essential to provide assurance and market confidence.”
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