FOI 23 24 160 Document 07.pdf

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FOI 23-24/160 - Document 07
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 Payments Team

Fax: +61 1300 729 000
Risk & Claims Branch
www.asic.gov.au
Department of Finance

7 December 2020

Dear Sir/Madam,

ACT OF GRACE APPLICATIONS SUBMITTED BY s22(1)(a)(ii)

1.  ASIC refers to six applications submitted by s22(1)(a)(ii)  to the Department
of Finance (Finance) from 28 September 2020 to 9 October 2020 seeking
act of grace payments (Applications).
2.  s22(1)(a)(ii)  submitted the Applications on behalf of investors in SFSGlobal
Group  Pty  Ltd  (SFS  Global)  and  Suncoast  Financial  Solutions  Pty  Ltd
(Suncoast Financial) listed in in the excel spreadsheet found at Annexure
1 (Applicants).
3.  The  Applications  were  made  under  s65(1)  of  the  Public  Governance,
Performance and Accountability Act 2013 (Cth) (PGPA Act) in relation
to  the  loss  of  the  Applicants’  investments  in  SFS  Global  and  Suncoast
Financial.
4.  ASIC notes that the Applications are accompanied by forms signed by
the Applicants authorising s22(1)(a)(ii)
from s22(1)(a)(ii)  to act on behalf
of the Applicants as their representative.
SUMMARY OF ASIC’S RESPONSE
5.  ASIC recommends that Finance finalises the Applications as they do not
disclose any ‘special circumstances’ within the meaning of s65(1) of the
PGPA  Act  or  Resource  Management  Guide  401:  Requests  for

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purposes of s65(1) of the PGPA Act existed. For practical reasons, ASIC
wil   not  comment  on  any circumstances  specific  to  the  Applicants  as
referred to in their Victim Impact Statements.
STATUTORY FRAMEWORK FOR ACT OF GRACE PAYMENTS
16. Subsection  65(1)  of  the  PGPA  Act  sets  out  the  statutory  basis  for  the
Finance Minister to authorise an act of grace payment to an applicant.
It states:
‘The  Finance  Minister  may,  on  behalf  of  the  Commonwealth,
authorise,  in  writing  one  or  more  payments  to  be  made  to  a
person  if  the  Finance  Minister  considers  if  appropriate  to  do  so
because of special circumstances.

Note  1:  A  payment  authorised  even  though  the  payment  or
payments would not be authorised by law or required to meet a
legal liability.

Note 2: Act of grace payments under this section must be made
from money appropriated by the Parliament. Generally, an act
of  grace  payment  can  be  debited  against  a  non-corporate
Commonwealth  entity’s  annual  appropriation,  providing  that  it
relates  to  some  matter  that  has  arisen  in  the  course  of  the
administration of the entity.

(emphasis added)

17. The terms ‘appropriate’ and ‘special circumstances’ are not defined in
the  PGPA  Act.  However,  ASIC  understands  that  the  act  of  grace
payment  scheme  is  discretionary  and  that  it  is  intended  to  promote
fairness and equity in certain circumstances.
18. RMG 401 states at paragraph 10 that examples of special circumstances
which may make it appropriate to approve an act of grace payment
include where:
a.  an  act  of  an  NCE  has  caused  an  unintended  and  inequitable
result to the individual seeking the payment;
b.  Commonwealth  legislation  or  policy  has  had  an  unintended,
anomalous,  inequitable  or  otherwise  unacceptable  impact  on
the claimant’s circumstances; or

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c.  the matter is not covered by legislation or a specific policy, but
the  Commonwealth  Government  intends  to  introduce  such
legislation or policy, and it is considered desirable in a particular
case to apply the benefits of the relevant policy prospectively.
19. RMG 401 also states:
‘3.  The  act  of  grace  mechanism  is  generally  a  remedy  of  last
resort  and  it  is  not  used  when  there  is  another  viable  remedy
available to provide redress in the circumstances giving rise to the
application.

4.  If  other  avenues  exist  for  a  person  to  receive  financial
assistance from the Commonwealth (such as existing legislation
or  schemes),  it  is  recommended  that  those  avenues  are
investigated  before  a  request  is  made  for  an  act  of  grace
payment.’

ASIC RESPONSE
20. ASIC understands that the concerns expressed in the s22(1)(a)(ii)  Report
are:
a.  ASIC failed to perform the duties conferred on it by the ASIC Act,
by allowing s22(1)(a)(ii)
to operate an investment scheme while
contravening numerous laws and legislative requirements;
b.  ASIC failed to regulate s22(1)(a)(ii)
and take enforcement action
against him, allowing him to operate without membership of an
EDR scheme; and
c.  The Applicants are unable to obtain redress elsewhere.
21. In preparing its response, ASIC considered the statutory framework for
act of grace payments and RMG 401, as referred to at paragraphs 16
to 19 above.
22. ASIC wil  address each of these concerns below.
Statutory objectives of ASIC
23. ASIC  regulates  corporations,  managed  investment  schemes,
participants  in  the  financial  services  industry  and  people  engaged  in

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credit  activities  under  a  number  of  Commonwealth  laws.  These  laws
include the Act and the ASIC Act.
24. Section 1(2) of the ASIC Act sets out ASIC’s objectives. It states that:
‘In performing its functions and exercising its powers, ASIC must
strive to:

[…]

(g) take whatever action it can take, and is necessary, in order to
enforce and give effect to the laws of the Commonwealth that
confer functions and powers on it.’

25. It is clear from the statutory language of s1(2) of the ASIC Act that ASIC
generally does not operate under any legal duty to take any particular
action in any given set of facts.
ASIC’s oversight in regulation and failure to take enforcement action
26. ASIC  refers  to  Info  Sheet  151:  ASIC’s  approach  to  Enforcement  (INFO
Sheet  151)  which  sets  out  how  ASIC  selects  matters  for  formal
investigation.
27. INFO  Sheet  151  states  that  ASIC  considers  the  following  issues  when
deciding whether to take enforcement action:
a.  ASIC’s strategic priorities, taking into account matters such as the
seriousness of the alleged misconduct;
b.  the regulatory benefits of pursuing the alleged misconduct;
c.  the issues specific to a case, such as the availability of evidence
admissible  in  court  and  whether  the  alleged  conduct  is
continuing; and
d.  alternatives to a formal investigation which might address ASIC’s
concerns  more  effectively,  such  as  engagement  with
stakeholders and surveil ance.

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

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