Australian Securities and Investments Commission v Elm Financial Services Pty Ltd (No 2)

The Australian Securities and Investments Commission (ASIC) filed a case against Elm Financial Services Pty Ltd in the Federal Court, alleging that the company had breached disclosure requirements under Part 6D.2 of the Corporations Act. The primary dispute centred around the company’s fundraising activities, with ASIC asserting that Elm Financial Services had promoted investment schemes without proper disclosure. ASIC sought interim compliance orders and asset preservation injunctions to prevent further breaches and to safeguard the assets of the company pending the final resolution of the case.

The central legal issues before the Court involved determining whether the interim compliance orders and asset preservation injunctions were justified. ASIC argued that the lack of disclosure in the investment schemes promoted by Elm Financial Services constituted a significant breach of the Corporations Act. The Court had to assess the evidence presented by ASIC regarding the breaches and whether there was a real prospect that the company had engaged in unlawful conduct. Additionally, the Court needed to consider whether the granting of the interim orders was necessary to prevent unjust loss to the investing public and to preserve the company's assets.

The Court found that ASIC had provided sufficient evidence to support the granting of the interim compliance orders and asset preservation injunctions. The breaches identified by ASIC were significant and demonstrated a clear disregard for the disclosure obligations under the Corporations Act. The Court was satisfied that there was a real prospect that Elm Financial Services had engaged in unlawful conduct, and that without the interim orders, there was a risk of significant harm to the investing public and to the company's assets. Consequently, the Court granted the relief sought by ASIC, emphasising the importance of compliance with disclosure requirements in the financial services sector.

The Court issued interim compliance orders requiring Elm Financial Services to cease promoting the investment schemes in question and to provide full disclosure to affected investors. Additionally, the Court issued asset preservation injunctions to prevent the company from disposing of its assets. These orders were intended to maintain the status quo until the final determination of the case, ensuring that the company could not further prejudice the situation by either continuing its unlawful conduct or dissipating its assets.