FOI 23 24 160 Document 24.pdf

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FOI 23-24/160 - Document 24
Australian Securities
and Investments Commission
Office address (inc courier deliveries):
Level 5, 100 Market Street,
Sydney NSW 2000
Mail address for Sydney office:
GPO Box 9827,
Brisbane QLD 4001
Tel: +61 1300 935 075
Discretionary Payment Team
Fax: +61 1300 729 000
Risk & Claims Branch
www.asic.gov.au
Department of Finance

13 July 2021

Dear Sir / Madam,

ACT OF GRACE PAYMENT APPLICATIONS SUBMITTED BY s22(1)(a)(ii) ON BEHALF
OF INVESTORS IN TRIO CAPITAL LIMITED

1.  ASIC refers to  the  applications submitted by the s22(1)(a)(ii) to the
Department of Finance (Finance) on behalf of investors (Applicants) in
Trio Capital Limited (Trio Capital) (Applications).

2.  The Applications are made under subsection 65(1) of the Public
Governance, Performance and Accountability Act 2013 (Cth) (PGPA
Act) and seek act of grace payments in respect of losses incurred by the
Applicants, as a result of alleged ‘defective administration and
conduct’ by the Australian Prudential Regulation Authority (APRA).

3.  The Applications are accompanied by forms signed by the Applicants
authorising s22(1)(a)(ii) of s22(1)(a)(ii) to act on behalf of each Applicant
as their representative. The Applications are supported by a report
prepared by s22(1)(a)(ii) on behalf of each of the Applicants titled
‘Application for an Act of Grace Payment’ (s22(1)(a)(ii) Submission).
  4.  ASIC has reviewed APRA’s responses to the Applications dated 30 July
2020 (APRA Submission) and 12 January 2021 (APRA Further Submission).
  5.  The APRA Submission provides at paragraphs 5 to 6 a summary of the
legal basis for act of grace payments. ASIC considers  that this is an
accurate summary of the statutory framework.
  6.  The purpose of this submission is to respond to Finance’s request for a
response from ASIC to any concerns or matters raised by s22(1)(a)(ii) in the
Applications that ASIC considers it is appropriate for it to address.

ASIC RESPONSE
  7.  There are only limited references to ASIC in the s22(1)(a)(ii) Submission, and
no specific contentions of defective administration. The primary purpose

41614565

s37(2)(b), s47C, s47E(d)

s37(2)(b), s47C, s47E(d)
35. The grant of an AFSL to Trio Capital, including the appointment of Shawn
Richard as a responsible officer, was  considered in detail in the PJC
report.17 In particular, consideration was given to submissions made by
s37(2)(b), s47C, s47E(d)
17
PJC report, pp 79-83, 116-118, 127-128,

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ASIC about the adequacy of licensing arrangements at the time, and
the regulatory arrangements for entities  regulated by both ASIC and
APRA.
  36. As acknowledged in the PJC report, ASIC’s submissions  to the PJC
emphasised that there were limitations provided by the AFSL regime at
the relevant time, which set the threshold for obtaining an AFSL relatively
low and the threshold for cancel ing an AFSL relatively high, and focused
on the licensed entity rather than the directors, employees or other
representatives.18

37. The PJC report acknowledged the difficulties with the licensing system in
place at the time,19 but did not make any criticism of ASIC regarding the
grant of an AFSL to Trio Capital. Relevant provisions of the Corporations
Act were subsequently amended to give ASIC greater discretion in
granting and cancel ing AFSLs.  However, as stated  by ASIC in its
submission to the inquiry, while the amendments may have enabled
ASIC to act at an earlier stage had they been enacted at that time, they
would not necessarily have prevented investor losses.20

Conclusion
  38. While ASIC acknowledges the difficult circumstances described in the
statements accompanying the Applications, and the substantial impact
that the loss of their investments has had on the Applicants, ASIC
considers  that the Applicants’ loss was the regrettable result of the
fraudulent conduct by Trio Capital. ASIC also notes and endorses the
comments made in the APRA submissions concerning the role of a
regulator more general y.

39. ASIC would be happy to provide any further information which may
assist Finance in its consideration of these applications.

Yours faithfully,

s22(1)(a)(ii)

Senior Lawyer
Australian Securities and Investments Commission

Annexure A: Overview of ASIC’s Enforcement Outcomes
Annexure B: ASIC, Policy Statement 164 Licensing: Organisational capacities
(issued 28 November 2001; updated on 8 November 2002)

18
PJC report pp 79-80.
19
PJC report p 128.
20
PJC report p 81.

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Annexure A

Overview of ASIC’s Enforcement Outcomes

ASIC’s enforcement outcomes include:

•
Shawn Richard, former investment manager of ASF, being sentenced to 3
years and 9 months jail with a minimum of 2 years and 6 months. ASF was
one of the managed investment schemes operated by Trio. Mr Richard
pleaded guilty to two offences involving dishonest conduct in carrying on
a financial services business. Mr Richard also admitted to making a false
statement about a financial product.
•
The sentencing of Tony Maher (changed his name from Paul Gresham) to
25 months jail with a non-parole period of 15 months. Mr Maher was the
investment manager of ARP, a managed investment scheme operated by
Trio. Mr Maher pleaded guilty to 20 charges of making false or misleading
statements to obtain a financial advantage.
•
The permanent banning of Eugene Liu, ASF's chief  investment strategist,
from providing financial services.
•
Enforceable Undertakings with five former Trio directors by which  they
agreed not to be involved in the financial services industry or manage a
company for between two and 15 years. The former directors are Natasha
Beck, Keith Finkelde, David O’Bryen, David Andrews and Rex Phil pott.
•
An Enforceable Undertaking with planning firm Kilara Financial Solutions to
address compliance issues.
•
An Enforceable Undertaking with Tony Maher to never provide financial
services or manage a company.
•
Suspending the licence of financial planners Seagrims, and subsequent
cancel ation of this  licence at the company’s request on 19 September
2011.
•
Banning Seagrims directors Peter Seagrim and Anne-Marie Seagrim for
three  years. Their bans were subsequently reduced  to 6 months  by the
Administrative Appeals Tribunal (AAT) on review.
•
An Enforceable undertaking with former ASF auditor Timothy Frazer, that he
would not act as a registered company auditor for three years.
•
Banning Ross Tarrant from providing financial services for 7 years, a ban
that was subsequently upheld by the AAT. Mr Tarrant's appeal to the Ful
Court of the Federal Court was unsuccessful.
•
Permanent banning of Jeffrey Revell-Reade from providing financial
services in Australia.

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Some of the Enforcement Outcomes in Detail
Richard
•  Shawn Richard served his minimum jail term of two and a half years and
was released from prison on 20 January 2014.
•  This sentence was imposed after Mr Richard pleaded guilty to 2 offences
involving dishonest conduct in carrying on a financial services business. Mr
Richard also admitted to making a false statement about a financial
product.
•  Mr Richard entered into an Enforceable Undertaking  with ASIC on 3
December 2010 and has permanently undertaken not to participate in the
Australian financial services industry.
Maher
•  On 27 June 2014 Tony Maher,  the former director of the investment
manager of ARP was sentenced in the District Court of New South Wales to
a total of 25 months imprisonment with 15 months to be served before he is
eligible for parole.
•  This sentence was imposed after Mr Maher pleaded guilty to 20 criminal
charges including publishing false statements for the purpose of obtaining
a financial advantage.
•  In February 2012 ASIC accepted an Enforceable Undertaking from Maher
that he would not  ever again work in the Australian financial services
industry or manage a corporation.
Liu
•  On March 2013, an ASIC delegate permanently banned Eugene Liu, the
former Chief Investment Strategist for ASF from providing financial services.
•  Mr Liu sought a review of the decision to ban him in the AAT. On 31 October
2014 the AAT affirmed the decision of ASIC's delegate to ban him
permanently.
Tarrant
•  Ross Tarrant  was the sole director and authorised representative of a
financial services business operating in Wol ongong which invested more
than $23 mil ion of its clients’ funds in the ASF.
•  On 8 January 2014, the AAT affirmed ASIC's decision to ban Mr Tarrant from
providing financial services for 7 years.
•  Mr Tarrant was banned on the basis that he failed to disclose in statements
of advice that he was receiving a marketing allowance from Shawn
Richard; and failing to have a reasonable basis for the advice he provided
to 8 clients.
•  Mr Tarrant then appealed the AAT's decision to the Ful  Court of the Federal
Court.
•  The Ful  Court handed down its decision on 6 February 2015. The Ful  Court
dismissed Mr Tarrant's appeal as they did not identify any error of law by the
AAT and the 7 year ban stands.
Revell-Reade
•  On 5 May 2015, ASIC served an order on Jeffrey Revell-Reade banning him
permanently from providing financial services in Australia.
•  Revell-Reade is currently serving a 9 and half year sentence in the UK for his
involvement in a conspiracy to defraud UK investors through the mis-sel ing
of shares through boiler rooms operating from Spain.
•  Revell-Reade is an Australian citizen and is likely to be deported to Australia
on his release (either at the end of his sentence of on parole).

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• Revell-Reade was banned from providing financial services in Australia on
the basis of his conviction in the UK.