Cigno and BHF Solutions engaged in unlicensed conduct – July 14, 2023
Cigno Pty Ltd and BHF Solutions Pty Ltd have been found engaging in credit activities without holding an Australian credit licence. ASIC has also obtained permanent injunctions against Cigno and BHF Solutions to protect consumers.
When ASIC started its proceedings in 2020, BHF Solutions was writing more than 1,000 loans each day.
In one example loan, a borrower who loaned A$200 ($137) and repaid it in two months ended up paying A$177.75 ($122) in fees to BHF Solutions and Cigno. The same borrower later borrowed $600 ($411) more – paying another $703 (482) in fees.
The Federal Court found that “the objective purpose of the particular lending model established by BHF Solutions and Cigno was to avoid the provisions of the National Credit Act and National Credit Code which provide for the protection of consumers from disproportionate fees and charges”.
With the injunctions, Cigno and BHF Solutionare are prevented from operating this lending model or collecting repayments and fees from consumers on loans provided under this model.
In a separate investigation, ASIC is investigating another lending model regarding Cigno Australia Pty Ltd and BSF Solutions Pty Ltd – entities related to Cigno and BHF Solutions.
“ASIC took this case to stop a harmful lending model, one which circumvented Australian credit laws and regulations and charged excessive fees and charges to many vulnerable consumers.”
Karen Chester, Deputy Chair, ASIC
Committee cancels liquidator registration of Richard Ernst Auricht – July 6, 2023
Richard Ernst Auricht’s registration as a liquidator has been cancelled by a liquidator disciplinary committee. According to the ASIC, Auricht was not a fit and proper person to be registered as a liquidator after failing to carry out his duties by drawing remuneration without creditor or court approval, not lodging documents with ASIC, and didn’t have the required qualifications, experience, knowledge and abilities any more.
The Committee also noted that “Auricht’s failure to follow proper processes around the drawing of his fees has the potential to bring the entire profession into disrepute”.
Director disqualified after illegal phoenix activity – July 6, 2023
Director Gene Robert Farrelly has been disqualified from managing corporations for five years after his involvement in the failure of the five companies that went into liquidation:
- United Project Partners Pty Ltd;
- Secure Holdings Qld Pty Ltd;
- Unidev Qld Pty Ltd;
- United Property Sales Pty Ltd; and
- One Thought Pty Ltd.
ASIC found that Farrelly failed by:
- letting UPP and SHQ use self-managed superannuation funds (SMSF) for the benefit of investors that was contrary to the intent of the SMSF laws;
- letting UPP and SHQ to deceive Westpac into making loans to investors by using misleading financial transactions that showed false suitability; and
- misused UPP funds by making payments to fictitious employees and family members – which resulted in substantial loans being made to himself, including using the funds for personal use.
It was also found that Farrelly engaged in illegal phoenix activity by:
- transferring the business of UPP to related entity Summit QLD Pty Ltd for no consideration;
- authorised UPP to pay the staff wages of Summit; and
- authorised UPP to financially support Summit in difficult times.
At the time of ASIC’s decision, the companies owed a combined total of A$20,105,830 ($13,417,241) to unsecured creditors including approximately A$58,741 ($40,000) to Australian Taxation Office.
Restaurateur banned for four years – July 6, 2023
Edoardo Perlo has been banned from managing corporations for four years, after being involved in three failed companies between 2015 and 2020, where he was a director.
The companies, Casa Gusto Pty Ltd, SMC Drummoyne Pty Ltd, and Popina Kitchen Pty Ltd were all involved in the retail food industry in Sydney.
Allegedly, with two of the companies, Perlo traded while the companies while insolvent, failed to meet statutory lodgement requirements to Australian Taxation Office (ATO) and keep proper records.
The amount owed across the three companies totalled A$2.8m ($1.9m), including A$1.3m ($0.9) to ATO and A$162,000 ($108,108) for workers’ compensation insurance and payroll tax.
Select AFSL, related companies and managing director penalised A$13.6m – July 4, 2023
Select AFSL Pty Ltd (Select), BlueInc Services Pty Ltd (BlueInc) and Insurance Marketing Services Pty Ltd (IMS) have all been penalised for a total of A$13.5m ($9m) for engaging in unconscionable conduct and other contraventions of financial services laws when selling life, funeral and accidental injury insurance. ASIC found that the companies were mis-selling insurance over the phone to consumers, including First Nations consumers from remote communities where English was not the first language of many customers.
Russell Howden, the former managing and sole director of Select and BlueInc, has also been given a penalty of $100,000 ($66.715) for breaching directors’ duties, and will be disqualified from managing corporations for five years.
Select and BlueInc have also been penalised for conflicted remuneration contraventions, where sales agents were being given a cruise to the Gold Coast, a Vespa scooter and trips to Las Vegas and Hawaii. ASIC Deputy Chair Sarah Court called the unlawful sales incentive programs a key driver of Select’s misselling to consumers.
“In some of these cases, the consumers involved did not fully understand the products being sold to them, or even that they had been sold insurance in the first place.”
ASIC Deputy Chair Sarah Court
David Sutton permanently banned and McFaddens Securities’ lose licence – July 3, 2023
The director David Henty Sutton has been permanently banned from providing or performing in any financial services, or controlling an entity that carries on a financial services business. He has been disqualified from managing corporations for five years.
The ban comes after ASIC found Sutton not suitable to provide financial services because he:
- induced another person/s after making a statement that was misleading, false or deceptive or by a dishonest concealment of material facts;
- made false, misleading or deceptive representations to potential investors;
- engaged in conduct regarding a financial product that was misleading and deceptive or was likely to mislead and deceive;
- did not take reasonable steps to ensure McFaddens’ representatives did not accept conflicted remuneration; and
- was involved in and facilitated misconduct by Kristofer Ridgway.
The Australian financial services licence of Sutton’s company, McFaddens Securities Pty Ltd has also been cancelled.