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ASIC investigation into collapsed investment scheme leads to criminal charges

  •  
By Keith Ford
  •  
3 minute read

Multiple charges have been laid following an ASIC investigation into the collapse of the Sterling First group of companies.

Three men connected to the Sterling Income Trust (SIT) are each facing numerous criminal charges, and appeared in the Perth Magistrates Court on Friday (3 November).

Raymond Jones, founder of the Sterling Group, and Simon Bell have each been charged with 11 charges of aiding and abetting Sterling Corporate Services to engage in dishonest conduct in relation to a financial product or service, in breach of section 1041G of the Corporations Act.

Ryan Jones, the son of Raymond Jones, has also been charged with 10 charges of aiding and abetting Sterling Corporate Services to engage in dishonest conduct in relation to a financial product or service.

Sterling Corporate Services was the investment manager of the SIT, which was registered as a managed investment scheme with ASIC in 2012.

The matter is being prosecuted by the Commonwealth Director of Public Prosecutions.

The maximum penalty for an offence against section 1041G relevant for the period of the alleged misconduct is 10 years’ imprisonment and/or a fine of 45,000 penalty units.

From 2016, the Sterling Group offered a long-term residential lease to retirees and seniors called a Sterling New Life Lease (SNLL). Purchasing a SNLL required an upfront investment to be made in the SIT to fund ongoing lease payments.

On 9 August 2017, ASIC issued an interim stop order on Product Disclosure Statements (PDS) issued by Theta Asset Management offering investments in the SIT. On 29 August 2017, Theta consented to a final stop order being made by ASIC, which meant that no offers, issues, sales or transfers of interests in the SIT could be made until an updated PDS was approved for use. Theta did not issue an updated PDS until 27 October 2017.

The Sterling First group of companies collapsed in May 2019. Following the collapse, many SNLL tenants found themselves homeless as they were unable to meet lease payments under the SNLL.

In February 2022, the Senate Economics References Committee slammed ASIC for “regulatory negligence” in regard to the Sterling Group collapse.

The report released by the Senate committee stated that the corporate regulator did not act quickly enough and “should have been more proactive”.

During the inquiries in November 2021, ASIC chair Joseph Longo conceded that the regulator had received complaints about matters related to Sterling in late 2016, however it did not become officially involved until a referral by the Western Australia Department of Mines, Industry Regulation and Safety in March 2017.

“ASIC’s inaction and excuses are disconnected from the reality that it knew the target market of the Sterling scheme was vulnerable, elderly consumers,” senator Malcolm Roberts said in the report.

“This knowledge should have been sufficient for ASIC to respond aggressively to the very first reports of misconduct. By not doing so, more than 100 rent-for-life tenants lost $18.554 million upon Sterling’s collapse in 2019, and now face eviction and homelessness.”

Responding to the report, ASIC chair Joseph Longo said ASIC is “considering the report findings and recommendations”, which includes to investigate and, if appropriate, commence legal proceedings against AFSL holders that are alleged to have breached section 917B of the Corporations Act but have not consented to participate in relevant AFCA processes.