Federal Court restrains directors from providing financial services

Avestra Asset Management was a Queensland-based responsible entity and AFSL holder before ASIC moved to obtain orders to have the company wound up in September 2015.

The company operated a number of registered and wholesale managed investment schemes.

In a judgement delivered on 12 May 2017, the Federal Court held that Avestra and its directors Paul Rowles and Clayton Dempsey engaged in numerous contraventions of the Corporations Act.

The contraventions arose from: related party transactions being undertaken without member approval; failing to act in the best interests of scheme members; failing to do all things necessary to ensure that the financial services covered by Avestra’s AFSL were provided efficiently, honestly and fairly; and failing to notify scheme members of a material change in investment risk.

The two men also failed to exercise care and diligence, put in place adequate arrangements to manage conflicts of interest and failed to comply with duties owed by them as officers of responsible entity.

The misconduct that gave rise to ASIC's actions to wind up the company included the use of property of the schemes to acquire substantial shareholdings in an entity related to Avestra without member approval; the investment of the property of the schemes into a wholesale fund, which then made loans to related parties without member approval; and the investment of property of the schemes into offshore schemes without member approval.

Mr Rowles and Mr Dempsey agreed to the contraventions of the Corporations Act alleged by ASIC, as well as the disqualification and injunction ordered by the court.