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Directors hit with $390k penalty for breaches of duty

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By Reporter
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3 minute read

The Federal Court has ordered four current and former directors of a responsible entity for a managed investment scheme to pay $390,000 in penalties.

Following its April 2023 ruling that Endeavour and Linchpin Capital directors Ian Williams, Paul Raftery, Paul Nielsen, and Peter Daly (who was found to have acted as an officer of Endeavour) 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, the Federal Court has ordered the directors to pay $390,000 in penalties.

Australian Securities and Investments Commission (ASIC) deputy chair Sarah Court said: “ASIC took this case because we believed reasonable steps were not being taken by the directors to comply with their own compliance plan and obtain member approval for loans.

“Today’s penalties are significant and should act as a reminder to directors of responsible entities that operate managed investment schemes that they must act in the best interests of members.”

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Mr Nielsen, Mr Williams, and Mr Raftery did not contest ASIC’s case at trial and agreed to ASIC’s penalty submissions.

Mr Nielsen and Mr Williams will each pay a $100,000 penalty and be banned from managing corporations for four years.

Mr Raftery will pay a $40,000 penalty and be banned from managing a corporation for three years.

Mr Daly, who contested ASIC’s case, will pay a $150,000 penalty and be banned from managing corporations for five years.

In reaching her penalty decision with respect to Mr Daly, Justice Cheeseman said: “Mr Daly has only superficially accepted responsibility for his actions.”

She also noted that “the lack of remorse or contrition demonstrated by Mr Daly … is relevant in that it suggests a higher penalty is warranted for the penalty to achieve the objective of specific deterrence”.

The court previously found that between 2015 and 2018, Mr Nielsen, Mr Raftery, and Mr Williams, together with Mr Daly:

  • Did not take all reasonable steps to ensure that Endeavour complied with its compliance plan, obtain member approval for related party loans, and issue product disclosure statements that complied with the law.
  • Failed to exercise care and diligence.
  • Did not act in the best interests of members of the Investport Income Opportunity Fund.
The court found Mr Daly and Mr Raftery improperly used their positions by receiving unsecured loans from the unregistered Investport Income Opportunity Fund for their personal use. Mr Daly received loans totalling $130,000 and Mr Raftery took a $40,000 loan.

Mr Nielsen, Mr Raftery, and Mr Williams agreed to each pay $175,000 towards ASIC’s costs. Mr Daly has also been ordered to pay $175,000 in addition to a further proportion of ASIC’s costs associated with the contested hearings.

In November 2019, ASIC banned Mr Williams, Mr Nielsen, Mr Daly, and Mr Raftery from providing any financial services each for a period of five years.

Endeavour was the responsible entity of a registered managed investment scheme called the Investport Income Opportunity Fund. Linchpin operated an unregistered managed investment scheme, which was also called the Investport Income Opportunity Fund. Both funds were placed into liquidation in 2019.

Directors hit with $390k penalty for breaches of duty

The Federal Court has ordered four current and former directors of a responsible entity for a managed investment scheme to pay $390,000 in penalties.

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