Bringans and Australian Securities and Investments Commission
[2022] AATA 3403
•19 October 2022
Bringans and Australian Securities and Investments Commission [2022] AATA 3403 (19 October 2022)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2022/5410
Re:Mark Bringans
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
Decision
Tribunal:Senior Member G Lazanas
Date:19 October 2022
Place:Sydney
The application for a stay pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) is refused.
............................[SGD].................................
Senior Member G Lazanas
Catchwords
PRACTICE AND PROCEDURE – application for stay of decision – banning order – applicant banned from providing any financial services – applicant banned from controlling an entity that carries on a financial services business – applicant banned from performing any function involved in the carrying on of a financial services business – whether discretion of the Tribunal is enlivened to grant a stay – whether a stay is desirable for the purpose of securing the effectiveness of the hearing and determination of the application for review – prospects of success – reputational damage and financial hardship – whether hearing rendered nugatory – public interest considerations – anticipated delay in hearing of the application for review – application for stay refused
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s 41
Australian Securities and Investments Commission Act 2001 (Cth) s 1
Corporations Act 2001 (Cth) ss 79, 760A, 911A, 912A, 913BB, 920, 920A, 920B, 920E, 920F, 922A, 949A, 1041HCases
Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80
Australian Securities & Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130
Australian Securities and Investments Commission v Forge [2007] NSWSC 1489
Australian Securities and Investments Commission v McCormack [2017] FCA 672
McLean v Australian Securities and Investments Commission [2016] AATA 22
McNamara and Secretary, Department of Social Services [2016] AATA 189
Poidevin and Australian Securities and Investments Commission [2018] AATA 124
Schroeder and Australian Securities and Investments Commission [2021] AATA 3519
Scott and Australian Securities and Investments Commission [2009] AATA 798Secondary Materials
Australian Securities and Investments Commission, Regulatory Guide 105: AFS Licensing: Organisational Competence
REASONS FOR DECISION
Senior Member G Lazanas
19 October 2022
Introduction
Mr Mark Bringans has applied to the Tribunal for review of a decision of a Delegate of the Australian Securities and Investments Commission (ASIC) made on 28 June 2022 under ss 920A and 920B of the Corporations Act 2001 (Cth) (Corporations Act). The decision banned Mr Bringans from providing any financial services, controlling an entity that carries on a financial services business, and performing any function involved in the carrying on of a financial services business for a period of 8 years (Banning Order).
Mr Bringans has also requested, pursuant to s 41(2) of the Administrative Appeals Tribunal Act1975 (Cth) (AAT Act), a stay of the implementation of the Banning Order. An interim stay was granted by Deputy President McCabe on 26 July 2022 pending the outcome of this interlocutory application. Accordingly, the sole issue for determination by me is whether a stay should be granted pending the hearing of the substantive review.
The Banning Order is a consequence of Mr Bringans’ conduct as a Responsible Manager (RM) and a Key Person (KP) of Sirius Financial Markets Pty Ltd (Sirius). Mr Bringans held these roles between 26 September 2013 and 9 March 2021 as an independent contractor for the purposes of the Australian Financial Services Licence (AFSL) related to Sirius. He was employed elsewhere throughout almost the entirety of this period by an unrelated company, Australian Mutual Funds Exchange Pty Ltd (AMFEX). That company was engaged in the same financial services industry as, and was a competitor of, Sirius.
Counsel for Mr Bringans argued that the grant of a stay is warranted because he has a strong arguable case and the public interest does not require the Banning Order to be in place pending the outcome of the substantive review. It was submitted that Mr Bringans was not the active contravenor, no longer has any relationship with Sirius and that, furthermore, his employer, AMFEX, is not the subject of any concerns by ASIC. Mr Bringans gave evidence that he and AMFEX would be adversely affected.
Mr Bringans is prepared to accept a conditional stay, namely, he is prepared to resign from his current roles as RM and KP for the purpose of AMFEX’s AFSL and, additionally, not to accept any appointment as RM or KP for any AFSL holder. Mr Bringans, however, wanted to continue in his employment, namely, his position of Chief Executive Officer (CEO) of AMFEX.
The respondent, ASIC, strongly opposed the stay based on the strength of its case at the substantive review and the public interest issues. Counsel for ASIC argued that Mr Bringans was, effectively, a “no-show” responsible manager for Sirius. According to ASIC, Mr Bringans was more interested in collecting his monthly fees from Sirius than in the operations of Sirius which had, as it transpired, engaged in marketing on-line trading of highly risky financial products in breach of financial services laws. The contraventions were submitted to be very serious, especially as there was undisputed evidence of people having incurred substantial financial losses because of the contraventions.
Counsel for ASIC further submitted that Mr Bringans was likely to contravene or become involved in a contravention of a financial services law in the future due to his lack of personal insight and his tendency to shirk responsibility and blame others. ASIC submitted that Mr Bringans’ attitude and his abrogation of responsibilities was of particular concern in circumstances where he was in a senior position at AMFEX, which was apparently planning to launch new financial products similar to those previously promoted by Sirius.
ASIC has a statutory duty to ordinarily publicise the making of a banning order (see ss 920E and 922A of the Corporations Act). Mr Bringans sought orders to restrain ASIC from publishing his name in the ASIC Gazette and entering his name on the ASIC Register at the time of seeking the interim stay but not before me. Counsel for Mr Bringans made clear at the hearing before me that no application for confidentiality or a “suppression order” is ultimately sought.
I have decided that it is not desirable to make an order under the AAT Act staying the operation of the Banning Order for the reasons set out below.
Factual Background
It is important to first set out the relevant factual matrix including the activities that are the subject of the alleged contraventions of the Corporations Act before turning to the evidence of Mr Bringans in support of the stay application. This is followed by an outline of the relevant legal principles and their application to Mr Bringans.
An entity then known as FIBO Australia Pty Ltd (FIBO) applied for an AFSL in September 2013. The AFSL covered authorisations to deal in, amongst other things, derivatives and to provide general financial product advice to consumers. Mr Bringans was one of two initial RMs for the AFSL and entered into a RM agreement with FIBO which, relevantly, provided for him to be paid a fee of $4,000 per month.
In March 2014, Mr Bringans became a full-time employee and director of AMFEX, an entity unrelated to FIBO. In May 2014, he was appointed CEO of AMFEX. In June 2014, he was approved as RM and KP for AMFEX, being one of two RMs and KPs.
In around January 2018, there was a sale of FIBO, the AFSL holder entity, to Cardiff Global Management Pty Ltd. The AFSL holder entity then changed its name to Cardiff Global Markets Pty Ltd (CGM). In March 2018, Mr Bringans entered into a new RM agreement with CGM which provided for him to be paid $4,000 per month for services as RM and KP for the AFSL. Relevantly, the agreement specified that he was required to perform his services for a minimum of 3 days per week. This was while Mr Bringans was already working full-time at AMFEX. The RM Agreement listed, at Schedule 1, the following as the required services:
(a)have direct responsibility for significant day-to-day decisions about the Company’s financial services;
(b)decide how the Company’s financial services are provided and supervise the provision of those services;
(c)have weekly oversight and will review and monitor the market exposure and financial position of the Company to ensure compliance with the Applicable Law;
(d)use their best endeavours to maintain the Company's authorisations under the AFSL in accordance with the Applicable Law;
(e)collaborate with, and where necessary, supervise other responsible managers and provide supervision and assistance for other personnel of the Company as directed by the Company;
(f)undertake and continue to undertake training and professional development and maintain their competence, knowledge and skills as required under the Applicable Law;
(g)attend meetings and report to the Company Board or Board committees on any complaints, incidents, breaches, as directed by the Company;
(h)be available on an as needs basis to provide advice and supervision relating to the provision of financial services;
(i)provide or assist in the provision of any information required to be provided to regulatory authorities;
(j)assist in the preparation, implementation and audit of compliance programmes relating to the AFSL conditions including liaising with external service providers who report on compliance and related matters;
(k)assist in the preparation, review and implementation of dispute resolution and complaints handling procedures and policies;
(l)use their best endeavours to ensure that the Company complies with the conditions of the AFSL and any Applicable Law;
(m)assist in the establishment and maintenance of the Company's breach reporting principles (including the establishment and maintenance of the breach reporting register) as required by the Applicable Laws;
(n)review the Company's policies, procedures and document templates and update those policies, procedures and templates as directed by the Company (including assisting with the review of AML/CTF procedures and policies);
(o)provide advice in relation to the review, preparation, verification and implementation of any disclosure documents to be issued by the Company and any marketing or promotional materials issued by the Company (including the Company's website);
(p)assist in the training and preparation of training programmes, for the Company employees who provide financial services under the AFSL including continuing professional development training;
(q)maintain and provide the Company with records of their continuing development activities during the Term of this Agreement;
(r)notify the Company of any complaints against him or a company with which they are involved even if not associated with the Services;
(s)advise the Company as soon as possible but in any event at least within two (2) business days of any changes that would affect the Company’s organisational competence, including any change in good fame and character, qualifications, and experience under the Applicable Law; and
(t)perform other duties, activities and functions of the Position required and advised to the Manager by the Company as part of the Services as the Responsible Manager.
In early November 2019, CGM changed its name to Sirius Financial Markets Pty Ltd (as above, Sirius) and its ownership structure also changed. In or about December 2019, Mr Bringans was told that his services for the AFSL were no longer required. However, it was later agreed that he would continue as RM and KP until 31 January 2020. Subsequently, in February 2020, Mr Bringans agreed with Sirius’s solicitor that he would stay on the AFSL. There are contemporaneous records including email correspondence in the T-Documents before the Tribunal confirming these aspects. Mr Bringans continued to invoice for his fees as per the earlier RM agreement.
Sirius had a number of trading brands including Trade360 and ForexCFDs under which it offered financial products. It also used a company incorporated in Israel, Toyga Media Ltd (Toyga), from 12 September 2019 to 30 November 2020, to market and sell financial services to Australian customers. Toyga earned 40% (later increased to 50%) commission on the income derived by Sirius from customers it introduced.
Sirius breached various financial services laws due to the conduct of Toyga’s sales representatives, including s 1041H(1) of the Corporations Act as the representatives engaged in conduct that was likely to mislead consumers. This included making representations to consumers about the reasonable prospects of particular profits on the financial products in question. Sirius also breached s 911A(1) of the Corporations Act as Sirius’s AFSL did not cover the provision of personal financial advice to consumers.
There is undisputed evidence that Sirius, through the Toyga representatives, provided personal financial product advice in circumstances where the representatives obtained personal information regarding customers and then made recommendations, for example, about specific trading. ASIC conducted case studies of four affected customers. Those customers made the following financial losses:
Customer Total net loss (AUD) Customer A $289,752 Customer B $420,051 Customer C $83,265.05 Customer D $102,754.63
In August 2020, Mr Bringans received a report from a compliance firm about issues with the conduct and representations of the sales representatives including advice on false and misleading representation exposure, personal advice exposure, and pressure selling exposure. Mr Bringans was concerned, and he knew by that time, at the latest, that Sirius had breached its legal obligations. He received two further compliance reports with issues noted in September and October 2020. There were discussions of the compliance reports at Sirius’s monthly compliance meetings held by way of Skype from April 2020.
In about December 2020, the client communication functions of Sirius were moved to a Sydney sales team. It emerged that Sirius, through sales representatives, also breached financial services laws including by engaging in conduct, in respect of contracts for differences, which was likely to mislead in breach of s 1041H(1) of the Corporations Act as well as the provision of general product advice contrary to s 949A(2) of the Corporations Act, as requisite general advice warnings were not given.
On 12 February 2021, an officer from ASIC telephoned Mr Bringans and notified him that ASIC was investigating Sirius’s financial services activities.
On 15 February 2021, Mr Bringans resigned as RM of Sirius. On 9 March 2021, an application to vary Sirius’s AFSL to remove Mr Bringans as KP was made.
On 28 June 2022, ASIC made the Banning Order against Mr Bringans.
In its statement of reasons accompanying the Banning Order given under s 920F(1) of the Corporations Act, ASIC explained its decision as follows:
(a)first, under s 920A(1)(d), Mr Bringans is not a fit and proper person to provide one or more financial services, or perform functions as an officer of an entity carrying on a financial services business, or control an entity that carries on a financial services business.
(b)secondly, under s 920A(1)(da), ASIC had reason to believe Mr Bringans is not adequately trained, or is not competent, to provide one or more financial services, or perform functions as an officer of an entity carrying on a financial services business, or control an entity that carries on a financial services business.
(c)thirdly, under s 920A(1)(f), ASIC had reason to believe Mr Bringans is likely to contravene a financial services law.
ASIC stated that it may also allege that the power to ban was enlivened under s 920(1)(g), on the basis Mr Bringans has been involved in the contravention of financial services laws by Sirius because of his omission to act in his role, particularly given he was aware of the issues detailed in the compliance reports: see also s 79 of the Corporations Act.
THE EVIDENCE
Mr Bringans relied on his affidavit affirmed on 25 July 2022 in support of his application for a stay. Mr Bringans was not cross-examined for the purposes of the application and his evidence was mostly accepted by ASIC except for the circumstances as to his resignation from Sirius, to which I will come shortly. Counsel for ASIC also contended that some of Mr Bringans’ evidence fell short of establishing certain aspects of his submissions in support of a stay, for example, as to his financial hardship claims.
Mr Bringans as CEO of AMFEX
In his affidavit, Mr Bringans focused on his role and duties performed at AMFEX, emphasising that it differed substantially to the duties and functions in his role at Sirius. Mr Bringans was employed in a full-time capacity as a director of AMFEX on 4 March 2014 and became AMFEX’s CEO on 1 May 2014. In June 2014, he was approved as a RM and a KP of AMFEX. He was one of two RMs and KPs and he was responsible for the derivatives activity of AMFEX while the other RM and KP was responsible for the securities activity.
Mr Bringans stated that a typical day at AMFEX for him commenced at around 7am and finished at around midnight (Sydney time) as he would start by attending meetings after the close of the New York trading session. He would review information in various reports to determine the financial impacts on AMFEX and subsequently determine the exposure around AMFEX’s cashflow and implement appropriate actions. He would then attend to any Australian regulatory matters.
Mr Bringans stated that a key part of his duties as CEO is managing the launch of a new platform with the global IT team based overseas. During his working day, he would also liaise with numerous people, including the Asian client service team in Tokyo and brokers, the Indian client service team in Delhi and brokers, as well as various people in the Sydney office.
Mr Bringans had numerous other regular commitments as CEO of AMFEX. For example, at 9pm on Monday and Wednesday of each week he would also typically attend global meetings focused on the direction and goals of AMFEX’s owner. These meetings also had heavy input from the IT management team with which Mr Bringans was also involved in various projects.
Prejudice to Mr Bringans and AMFEX
Mr Bringans stated that if the Banning Order is not stayed, he will suffer financial hardship and lasting reputational harm. Specifically, he said he feared he would lose and not be able to regain his current employment as CEO at AMFEX.
At the time of his affidavit, Mr Bringans was 58 years old. He has been employed in the financial services industry since leaving university and does not have any experience, qualifications, or training outside the financial services industry such that he considers he is unlikely to find alternative employment in another field, especially at a comparable salary.
Mr Bringans stated that he will be forced to retire and rely on government financial support although he would want to work for as long as possible. Counsel for Mr Bringans indicated, in response to a query from ASIC’s counsel, that Mr Bringans has approximately $210,000 in superannuation.
Mr Bringans stated he is currently the sole income earner in his household and he and his wife will suffer financial hardship as they are dependent on his salary from AMFEX to meet their financial commitments. These include rent for their Sydney home, mortgage payments and other expenses associated with a one-third ownership of a Brisbane residential investment unit, car loan repayments, income tax debt payments and living expenses. His wife was unable to work as the bespoke events industry in which she worked has not recovered since the pandemic. He stated that besides his equity in the Brisbane unit, he has no other savings or assets to support himself and his wife.
Further, if a stay is not granted, Mr Bringans considers his reputation would be irreversibly damaged even if he succeeded in the substantive review as a strong reputation in financial services is vital. Mr Bringans further stated that he may have no option but to sell their assets to raise sufficient liquidity to service their expenses including the costs of the review application, or he may even have to withdraw his application.
As to the impacts on AMFEX, Mr Bringans stated that there will be significant disruption until a new CEO is recruited. If a stay were not granted, his departure from AMFEX would also cause significant gaps in AMFEX’s compliance and business, potentially also leaving its clients in an undesirable position. This is said to be because without his guidance, interactions with regulatory bodies and clients would likely be unsatisfactory. AMFEX would likely also suffer reputational damage on account of its CEO being the recipient of the Banning Order.
Mr Bringans also distinguished his role at AMFEX from that at Sirius emphasising that ASIC’s concerns were related to his past involvement with Sirius where he had no visibility over the operations of Sirius. Unlike his experience with Sirius, all necessary information was made available to him by AMFEX. On this basis, he stated that his capacity to cause any harm to the public if the Banning Order is stayed is very low because of the different circumstances at AMFEX.
Mr Bringans’ resignation from Sirius
Counsel for ASIC pointed to certain statements in Mr Bringans’ affidavit as somewhat concerning and potentially misleading. For example, Mr Bringans described the steps he took with respect to his resignation at Sirius, as follows:
“12. In December 2019, I left my positions at [Sirius]. However, I am now aware that the official paperwork relating to the cessation of my role at [Sirius] was not processed…
14. In February 2021, the processing issue was rectified, with my resignation from [Sirius] being notified to [ASIC].”
Counsel for ASIC submitted that Mr Bringans attempted to give the impression he had already resigned from his positions as RM and KP of Sirius in December 2019, and it was due to a “processing issue” that he was being shown on the “official paperwork” as continuing in these positions which was rectified in February 2021. This is to be contrasted with the contemporaneous records including email correspondence in the T-Documents which suggest that Mr Bringans had agreed to stay on as RM and KP of Sirius (see [14] above). It is unnecessary for me to make any findings on this aspect. As counsel for Mr Bringans pointed out, the motivation and circumstances of Mr Bringans’ resignation and, more importantly, Mr Bringans’ credibility, are better evaluated when Mr Bringans is cross-examined. Nevertheless, I have recorded the substance of ASIC’s concern for completeness, as this was canvassed at some length by counsel for ASIC in their submissions as a further reason to not grant a stay.
RELEVANT LEGAL PRINCIPLES
Broadly, the making of an application to the Tribunal does not affect the operation of the decision under review. Subsection 41(1) of the AAT Act provides:
Subject to this section, the making of an application to the Tribunal for a review of a decision does not affect the operation of the decision or prevent the taking of action to implement the decision.
That position is, however, subject to the Tribunal’s power to make orders staying or otherwise affecting the operation or implementation of the decision under review found in s 41(2) of the AAT Act which provides:
The Tribunal may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
The statutory language of the stay power in s 41(2) of the AAT Act makes clear the power to order a stay is only available “for the purpose of securing the effectiveness of the hearing and determination of the application for review”. The statutory language contemplates the Tribunal deciding whether the exercise of power is “desirable” having regard to “the interests of any persons who may be affected by the review”. The interests in turn must be decided by reference to the statutory scheme under which the original decision was made: Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130 at [51]-[54] and [56]-[57].
In determining whether a stay is appropriate, there are numerous authorities that establish that the Tribunal may consider a range of factors including the prospects of success; the consequences for the applicant of the refusal of a stay; the public interest; the consequences for the respondent in carrying out its functions depending upon whether a stay is granted or not; whether the application for review would be rendered nugatory if a stay were not granted; and other matters that are relevant. See Scott and Australian Securities and Investments Commission [2009] AATA 798 at [4].
A stay may also be made subject to conditions as set out in s 41(6)(a) of the AAT Act.
SHOULD A STAY BE GRANTED?
Before turning to address each of the relevant factors, I note that counsel for ASIC urged me not to exercise the discretionary power to alter what he described as “the prima facie position”, unless I was satisfied that a “compelling reason” exists to do so. Counsel for Mr Bringans argued there is no such default position in the AAT Act nor is there a threshold of a compelling reason. He submitted it was inappropriate for ASIC to put such a gloss on the statutory language of s 41 especially in the absence of any authorities.
I agree with counsel for Mr Bringans that s 41(2) of the AAT Act, on its terms, does not require a compelling reason and that it contemplates the exercise of a discretion in certain circumstances. The Tribunal must be satisfied in every case where it is requested to exercise the discretion that the stay is sought and granted for the purpose of securing the effectiveness of the hearing and determination of the reviewable decision: s 41(2) of the AAT Act.
Furthermore, s 41(1), by the use of the words “subject to the section” at the start of the sub-section, requires that s 41 be read as a whole. It follows that while the making of an application to the Tribunal for a review of a decision does not of itself affect the operation of the decision as a starting point, if a request is made to the Tribunal for the exercise of the discretion to stay the operation of the decision, then the Tribunal may, relevantly, make such order or orders staying the operation of the decision. The Tribunal must adhere to and give effect to the whole of s 41 of the AAT Act.
Finally, it was acknowledged by counsel for Mr Bringans that “it will usually be the applicant who will need to provide the Tribunal with sufficient evidentiary material to enable it to exercise its discretion in accordance with law”: McNamara and Secretary, Department of Social Services [2016] AATA 189 at [12].
Prospects of success
In considering an applicant’s prospects of success for the purpose of a stay application, it is not the role of the Tribunal to conduct a preliminary hearing of the review application based on the evidence: Poidevin and Australian Securities and Investments Commission [2018] AATA 124, [39] – [40].
It is relevant, however, for the Tribunal to examine whether, in light of the evidence before it, the applicant’s prospects of success are sufficiently high to justify the grant of a stay. Mr Bringans argued that that threshold is clearly met because, according to him, there are obvious flaws in ASIC’s reasoning.
First, ASIC relied on the conclusion that Mr Bringans had failed to ensure that Sirius complied with financial services laws and effectively imposed a form of strict liability. Mr Bringans argued that as he did not engage in the conduct that constituted contraventions, or have management responsibility for the operations of Sirius, ASIC needed to engage in more detail with what steps Mr Bringans did take to monitor and supervise the operations of Sirius.
Secondly, Mr Bringans argued that ASIC failed to articulate any proper basis for its conclusion that there was reason to believe that Mr Bringans was not a fit and proper person: see ss 920A(1)(d) and 913BB(2) of the Corporations Act. In particular, Mr Bringans complained that ASIC’s finding that he lacked “integrity” is unexplained.
Thirdly, there was no basis to find that Mr Bringans was not “adequately trained” or “not competent” and, therefore, that s 920A(1)(da) of the Corporations Act was satisfied.
Fourthly, there was no basis to find that Mr Bringans was likely to contravene a financial services law in the future as per s 920A(1)(f). In this regard, Mr Bringans asserted that ASIC did not explain what the likely contravention might be or take into account that he no longer had a role with Sirius and, in his role at AMFEX, he is responsible for the conduct of its day-to-day business. Further, ASIC did not point to any evidence establishing that either Mr Bringans, or AMFEX, had any history of non-compliance with a financial services law.
Fifthly, ASIC did not explain why the scope of the Banning Order was as wide as possible.
Counsel for Mr Bringans stated that he did not challenge ASIC’s arguments about the importance of the roles of RM and KP pursuant to the Corporations Act and ASIC’s Regulatory Guide 105: AFS Licensing: Organisational Competence (RG 105). Nor did counsel for Mr Bringans dispute the factual description and the seriousness of the contraventions. But counsel for Mr Bringans sought to confine the relevant conduct to when Mr Bringans was wearing his Sirius “hat” (as distinct from his role at AMFEX). He also argued that, at worst, Mr Bringans failed to adequately supervise or monitor the employees and contractors of Sirius and only in a limited period, namely mid to late 2020 to early 2021, noting Mr Bringans had been RM and KP of Sirius from 2013. Mr Bringans reiterated that ASIC did not find he was directly involved in the contravening conduct.
A key problem with the arguments mounted by Mr Bringans is that the role of a RM is based on the obligations in s 912A(1) of the Corporations Act and, amongst other obligations, it is mandatory for the AFSL holder to maintain competence to provide the financial services in question, as well as ensure that representatives are adequately trained and competent to provide the financial services covered by the licence. As a RM has direct responsibility for significant day-to-day decisions about the provision of financial services by the business, a RM’s role is critical to meeting the obligations set out in s 912A(1), including those relevantly set out above. Clearly, the person nominated to ASIC as a RM should have the experience and authority to properly manage the business of the AFSL holder. Additionally, where a RM plays a pivotal role in the provision of the financial services, ASIC may attach a condition to the AFSL, as it did in the case of Sirius, requiring the AFSL holder to nominate the relevant RM as a KP and requiring notification of any change of KP, so as to provide further assurance to ASIC about the person who is accountable. See Schroeder and Australian Securities and Investments Commission [2021] AATA 3519 (Schroeder) at [42], [50] and RG 105.
Having regard to the significance of the role of RM and KP, I agree with the observations of counsel for ASIC that Mr Bringans’ prospects of success with respect to the review application are weak in circumstances where he effectively abrogated his duties and was recklessly indifferent as RM and KP. Mr Bringans was not, on his own admission, involved in any significant day-to-day decisions of Sirius’s financial services business. On the limited evidence before me, it appears that Mr Bringans was not invested in his roles as RM and KP at Sirius and did not take them seriously. Moreover, Mr Bringans’ attempts to use his minimal involvement with Sirius’s business as an excuse, on the basis that Sirius was running its own business, and that Sirius did not reach out to him for any assistance, are unlikely to impress the Tribunal at the substantive review. Similarly, the fact that Mr Bringans was apparently not being given sufficient information by Sirius and appeared passive when he should have acted to address the situation or resign from his roles, is likely to also count against him at the substantive review. In Schroeder at [104] and [105] the Tribunal stated as follows in relation to Mr Schroeder who claimed to be constrained and ineffectual in the discharge of his duties:
104. ….By not speaking up (to the regulator, if necessary) or stepping down, he helped allow this culture to flourish. That culture lies at the heart of the behaviour which has been recently highlighted in the Royal Commission, and which threatened achievement of the objectives in s 760A. The seriousness of Mr Schroeder’s shortcomings weighs heavily in favour of a ban…
105. …The regulatory regime cannot achieve the objectives set out in s 760A of the Corporations Act if officeholders in various roles do not faithfully, competently, fearlessly and diligently discharge their obligations. Mr Schroeder’s passivity in the face of improper constraints is not adequate conduct.
The reality is that Mr Bringans probably could not have effectively performed his RM and KP role for Sirius, nor could he have provided the services required under the RM agreement, because he was working in a full-time role at AMFEX between about 7am and midnight on business days. Although he attended a few monthly compliance meetings for Sirius, he apparently did very little else, even when he became aware of some of the exposures from the compliance reports.
ASIC acknowledged that Mr Bringans has not previously been subject to a banning order. However, according to ASIC’s records, he has been a director at another company - FXPRO (Australia) Pty Ltd between May 2011 and February 2013 - an entity which had numerous contraventions of financial services laws. Regardless, a clean personal history is unlikely to allow Mr Bringans to avoid a lengthy ban at the substantive review: see Australian Securities and Investments Commission v McCormack [2017] FCA 672. ASIC was also concerned that Mr Bringans had been appointed RM for Moga International Group Pty Ltd from February 2021 for 13 months. This was in circumstances where he was working full-time as CEO of AMFEX, aware of the contraventions by Sirius as well as ASIC’s investigations (see [20] above) and had just resigned as RM and KP of Sirius (see [21] above). ASIC submitted this supported its view that Mr Bringans failed to appreciate the seriousness of the RM role.
On the limited evidence before me, it is my preliminary view that Mr Bringans failed to embrace his obligations as RM and KP of Sirius and did not perform those obligations diligently. The fact that he may have done so for the same roles in his full-time role at AMFEX is unlikely to lead to him succeeding at the substantive review. This is because it is difficult to see how the Tribunal will compartmentalise his conduct in accordance with the various hats Mr Bringans wore. The Tribunal may, after all, focus on Sirius and consider the performance of his obligations at AMFEX to be irrelevant. In those circumstances, Mr Bringans is likely to be found not to be a fit and proper person under s 920A(1)(d) of the Corporations Act due to his failures to take his obligations seriously and perform them diligently. As Mr Bringans’ prospects of successfully having the Banning Order overturned in its entirety or having the breadth or the period of the ban significantly reduced are low based on analogous cases, this matter weighs strongly in favour of the Tribunal not granting the stay. For example, in Schroeder at [115], the Tribunal decided that Mr Schroeder in similar circumstances had no place in the financial services industry and banned him for a period of 6 years.
The consequences for Mr Bringans of the refusal of a stay
In his affidavit, Mr Bringans addressed the financial hardship to himself and his wife as well as the damage to his reputation. I accept his evidence in this regard and reject ASIC’s position that his statements were vague and lacked sufficient detail. However, as counsel for Mr Bringans acknowledged, notwithstanding the financial impacts which I accept will be quite detrimental to him, prejudice or hardship to an applicant is “hardly ever a sufficient basis for securing a stay”: McLean and Australian Securities and Investments Commission [2016] AATA 22 at [21]-[22].
Mr Bringans also states that third parties will suffer prejudice if the Banning Order is not stayed. Mr Bringans deposed that if a stay is not granted, his employer, AMFEX, may also be prejudiced as Mr Bringans would be precluded from employment at AMFEX, including to assist in a handover to a new manager. This, of itself, suggests he is not critical to AMFEX’s business; rather it would be beneficial for AMFEX and him to transition his role to his replacement. Mr Bringans conceded that changes were already underway, including to vary the AFSL so that he was no longer RM and KP. There was already another RM and KP previously appointed at AMFEX. Mr Bringans said clients of AMFEX would also be disadvantaged but ASIC pointed to it apparently having eight (8) clients as of 30 September 2021, and none of them were said to be classified as active clients. I consider the possible disadvantage to AMFEX and its clients would be limited and temporary in nature and, therefore, consider this factor to weigh against the grant of a stay.
Public interest
Mr Bringans accepts that the public interest of protecting the consumers of financial services is an important factor. This public interest is based on the objects of Chapter 7 of the Corporations Act set out in s 760A which relevantly include:
(a)confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and
(b)fairness, honesty and professionalism by those who provide financial services; and
(c)fair, orderly and transparent markets for financial products…
Subsection 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth) provides further context to ASIC’s functions. Relevantly, ASIC must strive to, amongst other things, “maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty…” and “take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it.” See Australian Securities and Investments Commission v McCormack [2017] FCA 672 at [60]-[67].
Against that background, it is acknowledged that banning orders under the Corporations Act are made by ASIC to protect the public interest, especially members of the public who deal with financial services providers. It follows that the need to protect consumers is paramount when assessing public interest impacts: see Australian Securities and Investments Commission v Adler (2002) 42 ACSR 80 at [80]. Banning orders have also been recognised as having a deterrent purpose not only against the recipient of the order as in protecting the public against misconduct of that person, but as a general deterrent in respect of others involved in the industry. That is, the object of general deterrence is served by signalling to others, the serious consequences which will ensue if they breach their duties. See Australian Securities and Investments Commission v Forge [2007] NSWSC 1489 at [103].
While Mr Bringans was not found by ASIC to be the active contravenor, it is unrealistic to expect that the Tribunal will excuse his failures in his roles as RM and KP of Sirius, as having occurred in a particular context as well as confined to a legacy issue, because he no longer has any ongoing role in Sirius’s operations. That would send the wrong message to providers of financial services and the public generally.
It is appropriate at this juncture to address the proposition put by Mr Bringans that the public interest can be further protected by either him giving an undertaking (or the imposition of conditions by the Tribunal) such that he ceases acting in his role of RM and KP at AMFEX and does not take up any other such roles pending the outcome of the review. Clearly, the protective purpose of the Banning Order would not be met where he continues in a position in the financial services industry. In my view, that would also send a negative message, namely, Mr Bringans can continue working in the financial services industry in a senior position for a company in the same sector even though not as RM and KP, despite being the recipient of a banning order. Accordingly, the general deterrent effect of a banning order would also be diminished. It follows that the grant of a stay with undertakings or conditions does not satisfy the public interest considerations.
The consequences for ASIC in carrying out its regulatory functions
The grant of a stay would not have any adverse effect on the performance of ASIC’s regulatory functions. This is notwithstanding there is a public interest in ASIC’s decisions generally being implemented immediately and those charged with regulation being seen to be fulfilling their role: Scott and Australian Securities and Investments Commission [2009] AATA 798 at [10]. This is because it is accepted that the grant of a stay in an appropriate case is part of the review process and specifically provided for in the AAT Act. This issue is therefore a neutral factor.
Would the review be rendered nugatory if a stay were not granted?
In his affidavit, Mr Bringans states that there is a prospect the review could be rendered nugatory if a stay is not granted. He states that even if he is successful on the review, he will not be able to work again in the financial services industry as his reputation will have suffered considerable damage. His counsel described the situation as the process being, in effect, the punishment. Importantly, for this factor to carry considerable weight, the application for review must be rendered pointless.
While I accept there is a risk that Mr Bringans may be disadvantaged, Mr Bringans’ conclusions with respect to him having difficulties finding work again in the financial services industry are, in my view, overly pessimistic. Based on the limited information before the Tribunal, Mr Bringans has been appointed RM for three entities in recent years which suggests he has strong relationships in the financial services industry, also supported by his extensive career in the industry. If a stay is not granted and Mr Bringans succeeds on the review application, he will be free to work again in the financial services industry. This is despite the fact he will likely have suffered reputational damage and associated financial impact for a period. On balance, this consideration weighs in favour of the Tribunal not granting a stay.
Finally, I accept the suggestion that Mr Bringans may not have the financial resources to fund legal representation for his substantive application if a stay is not granted. However, I do not accept the suggestion that Mr Bringans will be required to withdraw his application, as he may choose to represent himself in the Tribunal. In these circumstances, I am not persuaded that a stay of the Banning Order is essential for the purpose of securing the effectiveness of the hearing and determination of the substantive application.
Other matters
Mr Bringans was not the only person involved with Sirius that has been scrutinised by ASIC. There are two other recipients of banning orders who have filed applications for review with the Tribunal. This is a relevant factor in determining whether to grant a stay because those applications may be joined and heard together with the review proceeding of Mr Bringans, leading to the possibility that there may be delay in the hearing of the substantive review.
That factor weighs in favour of granting a stay as the impact on Mr Bringans is unlikely to be contained to a short duration. This is because the joinder of matters will likely involve some delay in corralling all the parties and any representatives for the hearing by the Tribunal. In all the circumstances, however, this factor does not weigh heavily in favour of staying the Banning Order.
CONCLUSION
I was not persuaded that a stay is required “for the purpose of securing the effectiveness of the hearing and determination of the application for review” under s 41(2) of the AAT Act. I was also not persuaded, even if the discretion to make a stay order was engaged, that it is desirable in all the circumstances to exercise the discretion to grant a stay order. The consideration of the abovementioned factors weigh against ordering a stay of the Banning Order. In particular, the prospects of success and the public interest considerations do not support a stay being granted in respect of the Banning Order, even on conditions. On the evidence before me, Mr Bringans’ prospects are weak. The public interest considerations, particularly the general deterrence effect of banning orders, also weigh heavily against the grant of a stay. In all the circumstances, I consider the application for a stay should be refused.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for the decision herein of Senior Member G Lazanas
……………………[SGD]………………………
Associate
Dated: 19 October 2022
Date of hearing: 9 September 2022 Counsel for the Applicant: Mr P Knowles SC Solicitors for the Applicant: Mr J O’Loughlin, O’Loughlin Westhoff Counsel for the Respondent: Dr P Bender Solicitors for the Respondent: Ms J Birch, Australian Securities and Investments Commission
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