Former in-house lawyer handed ASIC ban
ASIC has banned the former director and in-house counsel of a failed non-bank lender from managing corporations and providing financial services for five years.
The ban follows an investigation that found Malcolm Philip Bersten, of Sydney, breached his duties as a director and failed to comply with financial services laws.
Mr Bersten was an executive director and the in-house legal counsel of Provident Capital from 2 July 2007 to 28 January 2012. ASIC suspended Provident Capital’s Australian financial services licence on 15 October 2012.
ASIC’s investigation found Mr Bersten failed to exercise due care and diligence in the management and reporting of the largest loan made by Provident Capital through its fixed-term investment portfolio, and allowed Provident Capital to make inadequate and misleading statements to ASIC and Australian Executor Trustees Limited, the trustee of Provident Capital's debenture holders (AETL).
ASIC also found that Mr Bersten allowed Provident Capital to issue a debenture prospectus in December 2010 to raise funds from the public and to issue three information booklets (in January, March and April 2012) to ASIC, AETL and Provident Capital’s investors which contained inadequate and misleading statements.
Mr Bersten allowed Provident Capital to make a loan to a related company without obtaining adequate security and to buy a debt of $775,000 when he was aware the related company was unlikely to be able to repay the loan, ASIC said in a statement.
ASIC determined that Mr Bersten’s lack of attention and failure to act contributed to Provident Capital’s financial difficulties and eventual failure.
"ASIC’s actions against Mr Bersten and the former directors of Provident Capital should send a clear message that directors must exercise care and diligence in the management of company assets and the manner in which they are applied," ASIC commissioner John Price said.
"Directors must also ensure that representations made by the company to the public, as well as the company's accounts themselves, are correct and a reflection of the true position of the company," he said.
"ASIC will take action by protecting the public against those who fail to act in accordance with their obligations."
Mr Bersten has been granted permission to manage the trustee of his family trust and self-managed superannuation fund as well as his incorporated legal practice.
He has made an application to the Administrative Appeals Tribunal (AAT) for a review of ASIC’s decision.
ASIC’s investigation is continuing.
On 20 February 2015, ASIC also banned the former managing director of Provident Capital, Michael Roger O’Sullivan, of Sydney, from managing corporations for five years and from providing financial services for seven years.
Mr O’Sullivan sought a review of ASIC’s decisions in the Commonwealth AAT. The hearing of that review concluded on 17 November 2015 and a decision by the deputy president is pending.
On 1 July 2015, ASIC banned former non-executive director of Provident Capital, John Patrick Sweeney, of Sydney, from providing financial services for two years.
ASIC found Mr Sweeney failed to comply with financial services laws. Mr Sweeney has also sought a review of ASIC’s decision in the AAT.
On 28 July 2015, ASIC banned former non-executive director of Provident Capital, Trevor John Seymour, from managing corporations and providing financial services for three years. ASIC found Mr Seymour breached his duties as a director and failed to comply with financial services laws. Mr Seymour has also sought a review of ASIC’s decision in the AAT.
The liquidators of Provident Capital (McGrathNicol) assisted ASIC’s by preparing a detailed report on their investigation into Provident Capital. ASIC funded the liquidators’ investigation and report via the Assetless Administration Fund.
An ASIC statement explained that Provident Capital issued debentures to retail investors through their fixed term investment portfolio and advanced the debenture funds to third-party borrowers, including property developers, on a first mortgage basis.
The non-bank also operated a mortgage fund under a wholesale facility with Bendigo and Adelaide Bank and two managed investment schemes.
When Provident Capital went into liquidation on 24 October 2012, more than 3,000 Provident debenture holders were owed approximately $130 million in total.
As of 30 September 2015, Provident’s receivers (PPB Advisory) have estimated that the likely return to debenture holders will be 16 cents to the dollar.
There are currently two class actions against AETL in relation to the collapse of Provident Capital. These proceedings are being conducted in the NSW Supreme Court and were commenced by Meridian Lawyers and Slater and Gordon on behalf of debenture-holders.