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Three men face several criminal charges regarding the dishonest conduct of a managed investment scheme.
The Australian Securities & Investments Commission (ASIC), said the three men connected to the Sterling Income Trust (SIT) faced the charges following its investigation into the collapse of the Sterling First group of companies.
Raymond Jones, founder of the Sterling Group, and Simon Bell were each issued with 11 charges of aiding and abetting Sterling Corporate Services to engage in dishonest conduct about a financial product or service, a breach of section 1041G of the Corporations Act.
The third man charged was Ryan Jones, son of Raymond Jones, who received 10 charges of aiding and abetting Sterling Corporate Services to engage in dishonest conduct concerning a financial product or service.
ASIC revealed that Sterling Corporate Services was the investment manager of the SIT, which was registered as a managed investment scheme with ASIC in 2012.
In 2016 the Sterling Group offered a long-term residential lease to retirees and seniors called a Sterling New Life Lease (SNLL). Purchasing an SNLL required an upfront investment to be made in the SIT to fund the ongoing lease payments.
In 2017 ASIC issued a stop order on Product Disclosure Statements (PDS) by Theta Asset Management Ltd (Theta), the responsible entity of SIT, due to concerns about the PDS for SIT.
The concerns included inadequate disclosure of risks and conflicts of interest, omission of material information about the investment, presentation of prospective information about target returns and outdated and incorrect references.
In May 2019, the Sterling First group of companies collapsed, which ASIC said left many SNLL tenants homeless due to not being able to meet the lease payments under the SNLL.
The matter is being prosecuted by the Commonwealth Director of Public Prosecutions, with the maximum penalty for an offence against section 1041G for the period of misconduct being 10 years’ imprisonment and/or a fine of 4,500 penalty units ($945,000).
The charges follow the former managing director and accountable manager of Theta, Robert Marie, receiving a ban from ASIC of four years from providing any financial services in May 2021.
The Federal Court also ordered Mr Marie to pay a penalty of $100,000, while Theta was ordered to pay a fine of $2 million.
The SIT incident is the second managed investment fund in as many weeks to have reportedly breached the law.
Concerns were raised regarding the regulatory oversight of managed investment funds after allegations that the principal of AMS Ivanhoe Lawyers, John Adams, may have misappropriated investment funds from first mortgage loans.
The ABC alleged that the mortgage fund – which had been running for more than 40 years – may have been a Ponzi scheme, estimating that losses may be over $100 million.
[Related: How could alleged mortgage Ponzi scheme go undiscovered?]
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