Australian Securities and Investments Commission v M101 Nominees Pty Ltd (No 3)

In the matter of Australian Securities and Investments Commission v M101 Nominees Pty Ltd (No 3), the Australian Federal Court was tasked with determining whether certain entities provided financial services or financial products without a financial services licence, and whether certain financial products offered by entities associated with the second defendant were "inherently problematic" or "fatally flawed". The court was also required to decide whether new investors' funds were used to repay redemptions promised to old investors, and whether the offering of certain financial products entailed misleading and deceptive conduct. Additionally, the court had to consider whether certain entities provided financial services to a "retail client" without complying with requirements in Chapter 7 of the Corporations Act 2001 (Cth), and whether certain financial products launched by the second defendant were intended to circumvent orders of this Court in proceeding VID 228 of 2020. The court found that Mr Mawhinney was the directing mind and will of the relevant corporate entities, and that he was involved in contraventions under s 79 of the Corporations Act 2001 (Cth) and s 12GBCL of the Australian Securities and Investments Commission Act 2001 (Cth). The court held that jurisdiction was enlivened under ss 1101B and 1324 of the Corporations Act 2001 (Cth), and made orders permanently restraining Mr Mawhinney from engaging in certain activities in relation to financial products for a period of 20 years.

The court found that the financial products offered by the entities associated with Mr Mawhinney were "inherently problematic" or "fatally flawed", and that new investors' funds were used to repay redemptions promised to old investors. The court also found that the offering of certain financial products entailed misleading and deceptive conduct, and that certain entities provided financial services to a "retail client" without complying with requirements in Chapter 7 of the Corporations Act 2001 (Cth). The court found that certain financial products launched by Mr Mawhinney were intended to circumvent orders of this Court in proceeding VID 228 of 2020. The court found that Mr Mawhinney was the directing mind and will of the relevant corporate entities, and that he was involved in contraventions under s 79 of the Corporations Act 2001 (Cth) and s 12GBCL of the Australian Securities and Investments Commission Act 2001 (Cth). The court found that jurisdiction was enlivened under ss 1101B and 1324 of the Corporations Act 2001 (Cth), and made orders permanently restraining Mr Mawhinney from engaging in certain activities in relation to financial products for a period of 20 years.

The court considered the principles relating to misleading and deceptive conduct, and the principles concerning s 1101B and s 1324 of the Corporations Act. The court found that the scope of the proposed restraint was appropriate, and that the period of the restraint should be 20 years. The court considered the "Santow factors" and found that large financial losses, high propensity that the defendant may engage in similar activities or conduct, activities undertaken in fields in which there was potential to do great financial damage such as in management and financial consultancy, the defendant's lack of contrition or remorse, disregard for the law and compliance with corporate regulations, dishonesty and intent to defraud, and previous contraventions for similar activities all applied. The court found that the order would not unfairly prejudice any person.

The court made orders restraining Mr Mawhinney from engaging in certain activities in relation to certain financial products for a period of 20 years.