ASIC cancels MIS service provider’s AFSL

ASIC has cancelled the Australian financial services (AFS) licence of Guildfords Funds Management Pty Ltd after ASIC found significant and systemic failures of oversight and compliance in Guildfords’ provision of financial services.

ASIC has also banned for four years Dr Robert Payne – Guildford’s Responsible Manager, Key Person and sole director – from providing financial services, performing any function involved in the carrying on of a financial services business, and controlling an entity that carries on a financial services business.

The regulator said that Guildfords provided advisory and dealing services in interests in managed investment schemes and securities, and custodial and depository services to wholesale clients. It also provided trustee services to unregistered managed investment schemes (Schemes), including the Magnolia Capital Opportunities Fund II (Magnolia Head Fund).

On its website, Guildfords said it “specialises in AFS License applications and have an excellent understanding of the current regulatory landscape".

“From 19 September 2018 to 7 October 2022, former Magnolia Capital Group director Mr Mitchell Atkins was an authorised representative of Guildfords. Magnolia Capital Group entities, Magnolia Investment Pty Ltd (in Liquidation) (MIM) and Magnolia Asset Management Pty Ltd (in Liquidation) (MAM) were also corporate authorised representatives of Guildfords,” ASIC said in a release.

From 30 August 2018 to 13 July 2022, Dr Payne and Atkins were also directors of MAM.

On 22 November 2023, ASIC disqualified Atkins from managing corporations for five years and banned him for 10 years from providing financial services and engaging in credit activities.

“ASIC found that Guildfords failed to meet numerous obligations of the Corporations Act 2001 (Act), arising predominantly from its failure to adequately supervise Mr Atkins (and MIM) which enabled unauthorised high-risk trading of derivative products, specifically contracts for difference (CFD), that resulted in investor losses,” the regulator added.

ASIC’s findings included that Guildfords:

• did not comply with the financial services laws given it, as trustee of the Magnolia Head Fund, dealt in CFDs when it did not hold an AFS licence to do so and failed in its breach reporting obligations to report a reportable situation to ASIC;
• did not take reasonable steps to ensure that its representatives complied with financial services laws, and was involved in its representatives’ unauthorised CFD trading given Guildfords, as the trustee of the Magnolia Head Fund, released monies for CFD trading without conducting checks or making any objective enquiry that the released funds would be used appropriately and in accordance with the Act;
• did not take reasonable steps to ensure that its representatives complied with financial services laws given Guildfords failed to have oversight over documents which included misleading or deceptive representations (arising from Guildfords being unable to confirm whether it sighted such documents);
• did not comply with the conditions of its AFS licence as it failed to maintain measures to ensure compliance with financial services laws and failed to maintain training registers of its representatives;
• did not have adequate arrangements in place to manage the conflict of interest arising from Dr Payne being a director of MAM while also a responsible manager of Guildfords.

“To minimise the impact of the cancellation on current clients of Guildfords, the cancellation is subject to specifications, including that the licence continues until 30 December 2024 for the purpose of Guildfords providing services that are reasonably necessary for, or incidental to the day-to-day operation of the Schemes (excluding issuing any new interests in the Schemes),” ASIC said.

In its finding against Dr Payne, ASIC said he lacked the competence and diligence required of a Responsible Manager as he had no control or oversight over Atkins, MIM and MAM, with his failures extending to overseeing a licensee (Guildfords) that engaged in unauthorised derivatives trading (amongst other breaches), causing investor losses.

“He did not understand the extent of Guildfords’ failures to comply with its duties as a licensee and he sought to minimise the significance of, and his responsibility for, them, and was involved in Guildfords’ contraventions of financial services laws,” the regulator added.