Hawcroft and Australian Securities & Investments Commission
[2024] AATA 3596
•9 October 2024
Hawcroft and Australian Securities & Investments Commission [2024] AATA 3596 (9 October 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2023/1914
Re:Maree Narelle Hawcroft
APPLICANT
Australian Securities and Investments CommissionAnd
RESPONDENT
DECISION
Tribunal:Senior Member D K Grigg
Date:9 October 2024
Place:Brisbane
The decision under review is affirmed.
...............................[SGD].........................................
Senior Member D K Grigg
Catchwords
ASIC - FINANCIAL SERVICES - BANNING ORDER - Banning order under s 920A of the Corporations Act - applicant banned by ASIC from providing financial services for one year - whether applicant “fit and proper” under s 920A(1)(d) - whether new question of whether applicant “adequately trained” and “competent” under s 920A(1)(da) can be raised on review - relevance of competency and training to fitness - decision affirmed
Legislation
Acts Interpretation Act 1901 (Cth)
Administrative Appeals Tribunal Act 1975 (Cth)
Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)Corporations Regulations 2001 (Cth)
Cases
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Australian Securities and Investments Commission v Adler [2002] NSWCA 483; 42 ACSR 80
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185; 181 FCR 130
Australian Securities and Investments Commission v Forex Capital Trading Pty Limited, in the matter of Forex Capital Trading Pty Limited [2021] FCA 570
Australian Securities and Investments Commission v Healey [2011] FCA 717; 196 FCR 291
Australian Securities and Investments Commission v Hutchison [2020] FCA 978
Australian Securities and Investments Commission v McCormack [2017] FCA 672; 160 ALD 155
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2009] FCAFC 185; 181 FCR 130
Bevan v Tax Agents’ Board of New South Wales [2007] AATA 1162
David Hickie and ASIC [2013] AATA 853
Downey and Australian Securities and Investments Commission [2017] AATA 958
Grubisa v Australian Securities and Investments Commission (ASIC) [2023] AAT 3328
Frugtniet v Australian Securities and Investments Commission [2019] HCA 16
Hayes v ASIC [2006] AATA 1506; (2006) 93 ALD 494
Hughes and Vale Pty Ltd v New South Wales (No.2) (1955) 93 CLR 127
Karamian and Australian Securities and Investments Commission [2024] AATA 2006
Norfolk Ridge Vineyards Ltd and Australian Securities and Investments Commission [2005] AATA 1234
Norman and Tax Practitioners Board [2021] AATA 848
Rainbow Legend Group Pty Ltd and Australian Securities and Investments Commission [2016] AATA 665
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re HIH Insurance Ltd (in prov liq); Australian Securities and Investments Commission v Adler [2002] NSWSC 483; 42 ACSR 80
Re Howarth and Australian Securities and Investments Commission (2008) 101 ALD 602; (2008) 48 AAR 10; [2008] AATA 278
Re Slee and Australian Prudential Regulation Authority [2006] AATA 206; 14 ANZ Ins Cas ¶61–704
Re Su and Tax Agents’ Board of South Australia (1982) 61 FLR 1
Rich v Australian Securities and Investments Commission (2004) 220 CLR 129
Rich v Australian Securities and Investments Commission [2004] HCA 42; 220 CLR 129
Ridden v Tax Practitioners Board [2020] AATA 422
Rosenberg and Australian Securities and Investments Commission [2010] AATA 654; 117 ALD 582
Seagrim v ASIC [2012] AATA 583
Sovereign Capital Limited and Australian Securities and Investments Commission [2008] AATA 901; 109 ALD 398
Toohey v Tax Agents’ Board of Victoria (2007) 67 ATR 522
Westeq Ltd and Australian Securities and Investments Commission [2006] AATA 34
XTWK and Australian Securities and Investments Commission [2008] AATA 703
Secondary Materials
Australian Securities and Investments Commission Regulatory Guide 98: ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders (November 2022)
Contents
Decision
REASONS FOR DECISION
INTRODUCTION & BACKGROUND
ASIC Investigation
Appeal to the Tribunal
ASIC’s Additional Ground
LEGISLATIVE REQUIREMENTS
Australian Financial Services Licence
Australian Securities and Investments Commission Act 2001
Banning Orders
When a person is not a fit and proper person
Purpose of a banning order
Australian Securities and Investments Commission Regulatory Guide 98: ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders
Table 2: Key factors we consider in deciding to make a banning order
Table 3: Factors and examples of conduct relating to specific periods of banning
EVIDENCE
Maree Hawcroft
Statement of Personal Information
Qualifications and Competence
Adam John Vieglais
Meng Meng Wen
Emma O’Brien
Rajbir Bains
MS HAWCROFT’S SUBMISSIONS
Errors in SPI
Competence
Representations
ASIC’S SUBMISSIONS
Fit and Proper
Errors in SPI
Competence
Representations
CONSIDERATION
Has the power to make a banning order been enlivened?
Fit and Proper
What does the phrase “fit and proper” mean?
Incorrect Answers on SPI
Competence
Representations
Is a banning order appropriate
Impact on Applicant
Length of Ban
Conclusion
DECISION
REASONS FOR DECISION
Senior Member D K Grigg
9 October 2024
INTRODUCTION & BACKGROUND
Ms Hawcroft is currently a director and chief financial officer of two Australian financial services licencees, ACN 127 523 193[1] (ACN 127) and ACN 114 733 569 (ISG Financial Services Limited or ISG).[2]
[1] Exhibit 1, Hearing Book (TB), p 729-740 (478-489).
[2] TB, p 813 (562).
Ms Hawcroft is also the director of ACN 638 625 162 (MBF Nominees Pty Ltd)[3] and ACN 659 987 425 (ACN425).[4]
[3] TB, p 805 (554).
[4] TB, p 802 (551).
ACN 127 and ISG operated financial services businesses under their own respective Australian financial services licences (AFSL).[5]
[5] TB, p 741-768 (490-517); 826-853 (575-602).
ASIC suspended ISG’s AFSL on 27 June 2022. ISG was suspended from offering any interests in two registered managed investment schemes it was the responsible entity for. The basis for the suspension was that ASIC had found that ISG had not met statutory audit and financial reporting obligations and did not have the requisite professional indemnity insurance between 14 July 2020 and 21 June 2021.
Following an extension, ISG’s suspension was revoked on 6 February 2023.[6]
[6] TB, p 175-180, First Affidavit of Maree Narelle Hawcroft dated 21 March 2023 (“Applicant First Affidavit”), MNH-3 to MNH-5.
On 12 July 2022, the shareholding of ACN127 was transferred to ACN425.[7]
[7] TB, p 486-495, Applicant First Affidavit, p 4, para 19.
MBF Nominees is the ultimate shareholder of ACN127.[8]
[8] TB, p 437 (186), Applicant Affidavit, MNH-6; TB, p 323 (72), Applicant Affidavit, p 4, para 20.
Following ISG’s initial AFSL suspension, in or around 14 July 2022 ACN127 applied to ASIC for a variation to the conditions of its AFSL (Variation Application).[9] Condition 2 of ACN127’s AFSL provided, among other things, that:[10]
(a)the Company advise ASIC in writing when a named key person ceases to be an officer or to perform duties on behalf of the licensee with respect to its financial services business within 5 business days, along with the following additional information;
[emphasis added]
[9] TB, p 1003-1016 (752-765).
[10] TB, p 798 (547).
On 18 July 2022 ACN127’s then lawyers (the Tribunal will refer to them as “Law Firm A”), wrote to ASIC to inform it that:[11]
(a)a “key person” (the Tribunal will refer to him as “Mr B”), had resigned as director on 12 July 2022; and
(b)another person (the Tribunal will refer to him as “Mr W”) had been appointed by ACN127 as a responsible manager and key person on 12 July 2022.
[11] TB, p 798-800 (547-549).
On 30 September 2022 ASIC responded to Law Firm A requesting further information be provided for it to assess the requested variation and to assess whether the officers of the company were “fit and proper”.[12] ASIC required the relevant officers to complete a Statement of Personal Information (SPI).
[12] TB, p 1017-1019 (766-768).
Ms Hawcroft, as director, completed the SPI as requested by ASIC. Pursuant to the SPI Ms Hawcroft declared the following answers to be true and correct:
Within the last 10 years, within Australia and/or overseas: 12. Have you been engaged in the management of any companies/businesses that carry on a trade, business or profession for which a licence, registration or other authority is required by law? No 13. Have you been engaged in the management of any companies/businesses that are or were the subject of any investigations or proceedings by any regulatory body, licensed entity with a code or industry/professional association? No 17. Have you ever been engaged in the management of any companies/businesses that have had a Corporations Act 2001 (or previous corresponding laws) licence or National Consumer Credit Protection Act 2009 licence or Insurance Agents and Brokers Act 1984 registration revoked or suspended? No
The SPI was provided to ASIC on 14 October 2022.
The answers given by Ms Hawcroft were, in fact, incorrect because:
(a)Ms Hawcroft had clearly been engaged in financial services businesses; and
(b)during the time Ms Hawcroft was its director, ISG’s suspension was extended by ASIC on 23 September 2022.
ASIC Investigation
Based on the answers given by Ms Hawcroft in the SPI, ASIC informed Ms Hawcroft it was considering whether she should be banned from being a director under s 920A of the Corporations Act2001 (Cth) (Corporations Act).[13]
[13] TB, p 225 (147).
Following its investigation, on 24 November 2022 ASIC issued a notice to Ms Hawcroft stating it had concerns about whether she should be banned from providing financial services, controlling an entity that carries on a financial services business or performing any function involved in the carrying on of a financial services business.[14]
[14] TB, p 681 (430).
On 19 December 2022 ISG, through new lawyers, wrote to ASIC to inform ASIC it was aware of errors in the documents lodged on ISG’s behalf by Law Firm A and advised ASIC the declaration had been completed incorrectly and the responses to questions 12, 13 and 17 should have been “yes”.[15]
[15] TB, p 672.
ASIC invited Ms Hawcroft to appear at a hearing to demonstrate why she should not be banned.[16]
[16] TB, p 681 (430).
Ms Hawcroft provided written submissions and witness statements to ASIC for the ASIC hearing.
ASIC was concerned, given the alleged misstatements in the SPI, that Ms Hawcroft had acted dishonestly, or lacked the diligence and professionalism needed of someone in her position as director of two financial services licencees.[17]
[17] TB, pp 670 (419), p 684 (433).
For the ASIC hearing Ms Hawcroft declared:
(a)she had no specific recollection of the SPI;[18]
(b)her former lawyers “pre-filled” the SPI;[19]
(c)she telephoned a paralegal/law clerk at Law Firm A and queried whether the answer to the first question was correct, to which the clerk assured her it was;[20]
(d)she had trusted the advice of the law clerk;[21]
(e)she “did not appropriately register the other two errors”;[22]
(f)she acknowledged she was responsible for the form;[23]
(g)the situation had caused great personal distress;[24] and
(h)she had no intention to mislead ASIC.[25]
[18] TB, p 217 (139).
[19] TB, p 217 (139).
[20] TB, p 217 (139).
[21] TB, p 217 (139).
[22] TB, p 217 (139).
[23] TB, p 217 (139).
[24] TB, p 217 (139).
[25] TB, p 217.
Ms Hawcroft “absolutely” denied any dishonesty.[26]
[26] TB, p 217 (139).
Ms Hawcroft told the ASIC delegate (Delegate):
(a)she only became aware of the three errors when she was served with ASIC’s notice of hearing on 17 December 2022;[27] and
(b)she instructed Law Firm A to correct the record on the next business day.[28]
[27] TB, p 213 (135).
[28] TB, p 213 (135).
Ms Hawcroft submitted:
(a)
the errors were “human error”
and did not reflect a “gross lack of the requisite diligence and professionalism required of someone occupying a key role in a financial service”;[29] and
(b)her conduct in notifying ASIC of the errors promptly, “demonstrates that she is diligent” and “accepting of her responsibilities”.[30]
[29] TB, p 213 (135).
[30] TB, p 213 (135).
Following the ASIC hearing, the Delegate found that: ASIC’s power to make a banning order under s 920A(1) of the Corporations Act had been enlivened because Ms Hawcroft was not “fit and proper” considering the requirements in s 920A(1A), and 913BB(2)(k) of the Corporations Act.
The Delegate concluded “to be fit and proper means that a person conducts themselves with honesty, integrity, professionalism and sound judgement” and that “they should be trustworthy, act fairly and be competent to perform their role”.[31]
[31] TB, p 673 (422).
The Delegate was not satisfied Ms Hawcroft acted dishonestly. However, the Delegate did not accept the errors were the result of “human error”.
In the circumstances of those findings, the Delegate stated they had reason to believe that Ms Hawcroft was not a fit and proper person to perform one or more functions as an officer of an entity that carries on a financial services business or control an entity that carries on a financial services business.
In deciding to make the banning order, the Delegate stated that there was no reason to believe that Ms Hawcroft was likely to contravene a financial services law in the future, and that the ground for banning under s 920A(1)(f) of the Corporations Act was not made out.[32]
[32] TB, p 7.
The Delegate believed a banning order should be made considering the object of the legislation.[33] The purpose of a banning order is to protect the public, and to act as a general deterrence to others in order to help:[34]
(a)promote “fairness, honesty and professionalism by those who provide financial services” (s 760A(b) of the Corporations Act);
(b)promote “confidence in the financial services industry, especially the licensing regime administered by ASIC” (s 760A(a) and s 1(2)(b) of the ASIC Act);
(c)allow ASIC to “receive, process and store, efficiently and quickly, the information given to it” (s 1(2)(e) of the ASIC Act); and
(d)“maintain, facilitate and improve the performance of the financial system and entities within that system because ASIC will have information before it that it can rely on and use” (s 1(2)(a) of the ASIC Act).
[33] Section 760A of the Corporations Act provides that the main object of Chapter 7 includes promoting confident and informed decision making by consumers of financial products and services, and fairness, honesty and professionalism by those who provide financial services; see also s 1(2) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
[34] TB, p 22.
In determining the length of the ban, the Delegate considered Table 3 of the ASIC Regulatory Guide 98: ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders (“The Guide”). The Guide is for AFS licencees and their advisers to indicate how ASIC approaches these powers, and the matters ASIC takes into account. The Delegate found Ms Hawcroft’s conduct fell into the “banning for less than 3 years” category and found a banning order of one year was appropriate.[35] The Delegate noted that a “banning period at the lesser end of the scale is also intended to avoid unduly punishing Ms Hawcroft”.[36]
[35] TB, p 22.
[36] TB, p 154.
On 13 March 2023, following the hearing, the ASIC delegate made a banning order.[37] The banning order provides (Banning Decision):
… that under s 920A of the Corporations Act 2001 [ASIC] prohibits Maree Narelle Hawcroft from:
i.Controlling, whether alone or in concert with one or more other entities, an entity that carries on a financial services business; and
ii.performing any function involved in carrying on a financial services business (including as an officer, manager, employee, contractor or in some other capacity),
for one year.
[37] TB, p 670 (419).
A copy of the Banning Decision was sent to Ms Hawcroft as required by s 920A(4) of the Corporations Act.
Appeal to the Tribunal
On 27 March 2023, Ms Hawcroft applied to this Tribunal for review of the Banning Decision.
In addition, Ms Hawcroft filed two interlocutory applications:
(a)a stay of ASIC’s Banning Decision pending the hearing and decision of the Administrative Appeals Tribunal pursuant to s 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (“AAT Act”); and
(b)confidentiality and non-publication orders under s 35(2) and (3) of the AAT Act.
A stay order was made on 1 August 2023.
The application for non-publication orders and confidentiality orders was withdrawn.
Between the date of the Banning Order and the stay, Ms Hawcroft has to date served approximately five months and three weeks of her total banning period of one year.
In her application to the Tribunal Ms Hawcroft contended the answers provided on the SPI were the result of “genuine human error” and acknowledged that she should have answered “yes”.[38]
[38] TB, p 664 (413).
The Tribunal has jurisdiction to review the Banning Decision pursuant to s 25 of the AAT Act and s 1317B of the Corporations Act.
ASIC’s Additional Ground
ASIC originally contended Ms Hawcroft’s conduct in relation to the SPI contravened s 920A(1)(d) of the Corporations Act, asserting Ms Hawcroft was not a fit and proper person as a result of the erroneous SPI.
Subsequent to the making of the Banning Decision, ASIC contends there are further grounds to support the finding that Ms Hawcroft is not a fit and proper person, and to support a new ground to support a ban.
Following cross-examination of Ms Hawcroft on the first day of the hearing, ASIC raised a new ground in support of its contention that Ms Hawcroft should be banned.
ASIC contends that in addition to not being a “fit and proper” person, Ms Hawcroft is not adequately trained, or is not competent, to provide financial services; or perform functions as an officer of an entity that carries on a financial services business; or control an entity that carries on a financial services business, pursuant to s 920A(1)(da) of the Corporations Act.[39]
[39] TB, p 713 (462).
ASIC referred to several decisions it submits supports it ability to add this new statutory ground - Bolton and ASIC [2018] AATA 976 (“Bolton”), Schroeder and Australian Securities and Investments Commission [2021] AATA 3519 (“Shroeder”) and Betalli and ASIC [2023] AATA 3073 (“Betalli”).
Bolton considered whether the Tribunal could have regard to evidence relating to events under consideration which occurred after the date of the relevant decision. Consistent with Shi the Tribunal found the answer to that question was yes, provided the evidence was directed to the same question that was considered by the original decision maker.
In Shroeder, the reason the grounds “changed” or “expanded” was simply because of amendments made to the Corporations Act, in the wording found in s 920A(1)(d), between the date the reviewable decision was made and the date the decision was made by the Tribunal. As a result, the “question” before the Tribunal was different to that before the ASIC delegate. No submissions were made by the applicant in that matter on jurisdiction. Given the unique and uncontested circumstances, and limited analysis, in Schroeder, the Tribunal does not consider it supports ASIC’s contention that it is permitted to raise s 920A(1)(da) as a new ground on review. The Tribunal notes the High Court’s guidance in Frugtniet v Australian Securities and Investments Commission [2019] HCA 16; 266 CLR 250 at [14] where it said:
[the AAT] should ordinarily approach its task as though it were performing the relevant function of the original decision-maker in accordance with the law as it applied to the decision-maker at the time of the original decision.[40]
[40] Citing Minister for Immigration and Ethnic Affairs v Pochi (1980) 31 ALR 666 at 670‑671 per Smithers J; Shi (2008) 235 CLR 286 at 325 [134] per Kiefel J; see also Liedig (1994) 50 FCR 461 at 464, adopting and adapting Mobil Oil Australia (1963) 113 CLR 475 at 502.
In Betalli and Australian Securities and Investments Commission [2023] AATA 3073 the Tribunal was concerned with an application for discovery. It is not a final decision on any substantive issue. It appears that it was accepted the grounds could be expanded to include further grounds to ban the applicant in s 920A. What is not clear from the decision is what the additional issues were. The decision is very limited in its scope, and it is not immediately apparent that it is applicable here. In that matter the issue was whether the order to produce additional documents had adjectival relevance to the decision under review. The Tribunal does not consider this decision supports ASIC’s contention that it is permitted to raise s 920A(1)(da) as a new ground on review.
The Tribunal fulfils its role by having unrestricted access to material related to, and able to shed light on, the administrative decision under review. This is supported by the High Court decision in Shi v Migration Agents Registration Authority [2008] HCA 31; 235 CLR 286 (“Shi”) where the High Court concluded that the Tribunal is entitled to consider the evidence available at the date of the hearing, not as at the date the reviewable decision was made.
In Frugtniet v Australian Securities and Investments Commission [2019] HCA 16; (2019) 266 CLR 250 the Court said at [51] (citations omitted):
[51] The AAT exercises the same power or powers as the primary decision-maker, subject to the same constraints. The primary decision, and the statutory question it answers, marks the boundaries of the AAT’s review. The AAT must address the same question the primary decision-maker was required to address, and the question raised by statute for decision by the primary decision-maker determines the considerations that must or must not be taken into account by the AAT in reviewing that decision. A consideration which the primary decision-maker must take into account in the exercise of statutory power to make the decision under review must be taken into account by the AAT.
…
[15] The AAT cannot take into account matters which were not before the original decision-maker where to do so would change the nature of the decision or, put another way, the question before the original decision-maker. As Kiefel J observed in Shi, identifying the question raised by the statute for consideration will usually determine the facts that may be taken into account in connection with the decision. The issue is one of relevance, to be determined by reference to the elements of the question necessary to be addressed in reaching a decision.
[emphasis added]
The Tribunal notes that the Corporations Act specifically provides in s 913BB(2)(k) that the decision maker, in this instance the Tribunal standing in the shoes of the original decision maker, is to have regard to “any other matter” that is relevant in determining whether someone is fit and proper.
The Tribunal is mindful of the comments of Chief Justice Kiefel and Justices Keane and Nettle in Frugtniet v Australian Securities and Investments Commission [2019] HCA 16 (applying Shi) that:
[15]…The AAT cannot take into account matters which were not before the original decision-maker where to do so would change the nature of the decision or, put another way, the question before the original decision-maker.
The Tribunal does not consider that a new banning question under s 920A(1)(da) can be raised.
However, the Tribunal considers that Ms Hawcroft’s competence (which can in part be ascertained from a consideration of her qualifications, training and experience) is a relevant “other matter” to consider in relation to her fitness. The President of this Tribunal recently considered s 920A in Karamian and Australian Securities and Investments Commission [2024] AATA 2006 (Karamian). In President Kyrou’s opinion there was some overlap between ss 920A(1)(d) and 920A(1)(da) of the Corporations Act because issues of training and competency naturally would form part of a determination concerning fitness and propriety.[41]
[41] At [214].
Both parties accepted that competence was relevant to an assessment of Ms Hawcroft’s fitness.
The new evidence raised by ASIC does not alter the question being considered under s 920A(1)(d). Ms Hawcroft contended that the new evidence could only be considered if it was truly “new”. i.e., on the evidence that arose out of an event which occurred after the date of the reviewable decision. This submission is not in accordance with the authorities.
The authorities make it clear that additional evidence can be taken into account when determining whether Ms Hawcroft is a fit and proper person.[42]
[42] See Schroeder and Australian Securities and Investments Commission [2021] AATA 3519, at [33].
In Shi, Kiefel CJ (at 149) said:
There is no reason why the Tribunal's review should not extend to any information which sheds light upon the presence or absence of the necessary characteristics in the migration agent … There is good reason why the Tribunal should be in a position to consider the most recent material bearing upon the question of an agent's integrity and their fitness to continue to provide immigration assistance…
There is no temporal requirement under the Act with respect to assessing a person’s fitness for registration. The condition, or proviso, to a person being able to introduce new evidence is that each party must have a reasonable opportunity to present its case.
The issue before the Tribunal is whether Ms Hawcroft is fit and proper, therefore any matter which addresses that question is, prima facie, relevant. That is not to say Ms Hawcroft is not entitled to procedural fairness. The hearing was adjourned after the first day so that Ms Hawcroft would have adequate notice of any alternative or “new” grounds or arguments relied upon by ASIC, and she could then provide additional evidence and submissions addressing this additional ground. Ms Hawcroft filed additional evidence from herself and others and provided updated submissions addressing the topic of her qualifications, skills and competency.
The Tribunal is satisfied that Ms Hawcroft has had a reasonable opportunity to present her case. Ms Hawcroft did not contend otherwise.
LEGISLATIVE REQUIREMENTS
Australian Financial Services Licence
With some exceptions which are not relevant here, a person who carries on a financial services business in this jurisdiction must hold an Australian Financial Services Licence (“AFSL”) covering the provision of the financial services (s 911A of the Corporations Act).
Only “fit and proper” people can be granted an AFSL (s 913BA).
Section 912A of the Corporations Act sets out a financial service licensee’s mandatory obligations, which are, among other things to:
(a)do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly; and
(b)comply with the conditions on the licence; and
(c)comply with the financial services laws; and
…
Australian Securities and Investments Commission Act 2001
Two of ASIC’s statutory obligations in carrying out its duties and exercising its powers are contained in s 1(2) of the ASIC Act:
(a)maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty, reducing business costs, and the efficiency and development of the economy; and
(b)promote the confident and informed participation of investors and consumers in the financial system…
One of the critical underlying purposes of the ASIC Act is the objective of protecting the public from harm.
Banning Orders
ASIC’S power to make a banning order comes from section 920A of the Corporations Act which provides relevantly:
(1) ASIC may, in writing, make one or more orders (banning orders) against a person if:
…
(d) ASIC has reason to believe that the person is not a fit and proper person to:
(i) provide one or more financial services; or
(ii) perform one or more functions as an officer of an entity that carries on a financial services business; or
(iii) control an entity that carries on a financial services business; or
…
(da) ASIC has reason to believe that the person is not adequately trained, or is not competent, to:
(i) provide one or more financial services; or
(ii) perform one or more functions as an officer of an entity that carries on a financial services business; or
(iii) control an entity that carries on a financial services business; or
(emphasis added)
When a person is not a fit and proper person
Section 920A(1A) provides that for the purposes of paragraph (1)(d), ASIC must have regard to the matters in section 913BB, in determining whether a person is fit and proper.
Section 913BB of the Corporations Act provides:
(1) ASIC must have regard to the matters set out in subsection (2) (subject to Part VIIC of the Crimes Act 1914 ) for the purposes of applying any of the following provisions to a person:
(a) a paragraph of subsection 913BA(1);
(b) paragraph 920A(1)(d).
Note: Part VIIC of the Crimes Act 1914 includes provisions that, in certain circumstances, relieve persons from the requirement to disclose spent convictions and require persons aware of such convictions to disregard them.
(2) The matters are as follows:
(a) whether any of the following of the person has ever been suspended or cancelled:
(i) an Australian financial services licence;
(ii) an Australian credit licence, or a registration under the Transitional Act, within the meaning of the National Consumer Credit Protection Act 2009;
(b) whether any of the following has ever been made against the person:
(i) a banning order, or a disqualification order under Subdivision B of Division 8 of this Part;
(ii) a banning order, or a disqualification order, under Part 2 - 4 of the National Consumer Credit Protection Act 2009;
(c) if the person is an individual--whether the person has ever been disqualified under this Act, or any other law of the Commonwealth or of a State or Territory, from managing corporations;
(d) whether the person has ever been banned from engaging in a credit activity (within the meaning of the National Consumer Credit Protection Act 2009 ) under a law of a State or Territory;
(e) whether the person has ever been linked to a refusal or failure to give effect to a determination made by AFCA;
(f) whether the person has ever:
(i) been a Chapter 5 body corporate or an insolvent under administration; or
(ii) if the person is a partnership--had a creditor's petition or a debtor's petition presented against it under Division 2 or 3 of Part IV of the Bankruptcy Act 1966;
(g) if the person is the multiple trustees of a trust--whether a trustee of the trust has ever been a Chapter 5 body corporate or an insolvent under administration;
(h) whether, in the last 10 years, the person has been convicted of an offence;
(i) any relevant information given to ASIC by a State or Territory, or an authority of a State or Territory, in relation to the person;
(j) any other matter prescribed by the regulations;
(k) any other matter ASIC considers relevant.
A banning order may prohibit a person from (s 920B(1)):
(a)providing any financial services;
(b)providing specified financial services in specified circumstances or capacities;
(c)controlling, whether alone or in concert with one or more other entities, an entity that carries on a financial services business;
(d)performing any function involved in the carrying on of a financial services business (including as an officer, manager, employee, contractor or in some other capacity);
(e)performing specified functions involved in the carrying on of a financial services business.
The effect of a banning order is that (s 920C) Ms Hawcroft cannot be granted a financial services licence. Pursuant to section 920C, conduct contrary to the Banning Decision constitutes an offence.
A banning order takes effect from the date it is given to the person (s 920E).
Once a banning order has been made, ASIC must publish a notice in the Gazette as soon as practicable (s 920E(2)). ASIC is also obligated under s 922A of the Corporations Act and regulation 7.6.06 of the Corporations Regulations 2001 (Cth) (“Corporations Regulations”) to maintain records relating to financial services including the following details for each person against whom a banning order is made in the register of persons against whom a banning order under Division 8 of Part 7.6 of the Act is made:
(a)the person's name;
(b)the day on which the banning order took effect;
(c)whether the banning order is permanent or for a fixed period;
(d)if the banning order is for a fixed period--the period;
(e)the terms of the banning order;
(f)whether the banning order has been varied or cancelled;
(g)if the banning order has been varied:
(i) the date of the variation; and
(ii) the terms of the variation;
(h)if the banning order has been cancelled--the date of the cancellation;
(i)any other information that ASIC believes should be included in the register.
Purpose of a banning order
A banning order is directed to protecting the public interest by ensuring that only those who are competent and fit and proper can provide financial services.
The primary purpose of a banning order is to protect the public from harm. Banning orders also play a role in acting as a personal and general deterrence to those in the financial services industry. General and personal deterrence are important factors to be taken into account in determining the appropriateness of a banning order in the circumstances.
In Australian Securities and Investments Commission v Forex Capital Trading Pty Limited, in the matter of Forex Capital Trading Pty Limited [2021] FCA 570, Middleton J, said in the context of a disqualification order, that it “protect[s] the public and further[s] the objectives of personal and general deterrence”.
Australian Securities and Investments Commission Regulatory Guide 98: ASIC’s powers to suspend, cancel and vary AFS licences and make banning orders
As referred to earlier, the purpose of the Guide is to provide guidance in relation to the matters ASIC will generally take into account when exercising its powers to suspend, cancel or vary an AFS.
Table 2 in the Guide sets out factors ASIC will take into account in deciding to make a banning order (Table 2 Factors).
Table 2: Key factors we consider in deciding to make a banning order
Factors Relevant considerations Nature and seriousness of the suspected misconduct · Whether there is evidence that the contravention involved dishonesty or was intentional, reckless or negligent
· The amount of any benefit gained or detriment suffered as a result of the misconduct
· The amount of any loss caused to investors and consumers
· The impact of the misconduct on the market, including potential loss of public confidence
· Failing to discharge obligations on behalf of the financial services business
· Whether the conduct is continuing or likely to recur
· Whether the person has a poor compliance record (e.g. they have previously engaged in misconduct)
· Failing to manage a material conflict of interest
Internal controls · Whether the person complied with internal procedures Conduct after the alleged contravention occurs · When and how the breach came to the attention of ASIC
· The level of cooperation with our investigation
· Whether timely and effective remedial steps have been taken
· If in a position to do so, whether the person has been proactive in making appropriate changes to policies and procedures and, where applicable, changing their approach to ensure the effective functioning of their dispute resolution systems
· Whether the person has been proactive in compensating client losses and in communicating with clients about the contravention
The expected level of public benefit · The protective effect for investors and consumers
· The reinforcement of the integrity and reputation of the financial services industry
· Whether the case is likely to help participants in financial markets to better understand their obligations and thereby promote compliance
Likelihood that:
· The person’s behaviour will change in response to a particular action; and/or
· Other industry participants will be deterred from engaging in similar conduct through greater awareness of the consequences
· The compliance history of the person and their approach to compliance
· Whether behaviour (of the person or broader industry) is more likely to change if the person is banned
Mitigating factors · The extent to which there would be any personal hardship were a banning order to be made
· Whether the misconduct relates to an isolated complaint
· Whether investors or consumers have generally not suffered substantial detriment or been placed in a position of unacceptable risk
· Whether the misconduct was inadvertent and the person undertakes to cease or correct the conduct
The Guide then provides some examples, although not exhaustive, of conduct which may result in cancellation or suspension:
RG 98.42 Examples of misconduct that may result in an AFS licence being cancelled or suspended include:
i. dishonesty by a licensee;
ii. the licensee failing to implement and maintain effective compliance measures;
iii. systemic or persistent breaches of the licensee’s obligations;
iv. the licensee, at senior levels of management, misleading or hindering ASIC, including by concealing or deliberately destroying records it is required to keep;
v. there is actual or potential significant risk to investors and consumers because the licensee does not comply with its obligations under s912A, for example, by:
1. not having adequate resources, risk management arrangements or arrangements to manage conflicts of interest to continue to meet its obligations; or
2. not complying with the conditions of its licence; and
vi. the licensee giving information to ASIC that is false in a material particular or materially misleading, or omits a material matter.
Note: These examples are not exhaustive and are intended to only give an indication of misconduct that might lead to ASIC taking administrative action.
(emphasis added)
Table 3 of the Guide also provides examples of the type of conduct which would warrant a particular banning period:
Table 3: Factors and examples of conduct relating to specific periods of banning
Outcome Factors Examples of conduct (indicative only) Banning for less than 3 years · Conduct is the result of carelessness or inadvertence
· The person attempted to remedy the contravention and has fully cooperated with ASIC
· No loss (or minimal loss) to client
· Giving a complying disclosure document, but not within the required time
· Failing to lodge documents with ASIC as required
· Failing to notify ASIC about a representative’s breach of the licensee’s obligations
· Failing to perform the functions of an officer of a financial services business
· Failing to keep records that must be kept
Banning for 3-10 years · Conduct is inconsistent with the orderly operation of a financial market;
· Adverse impact on confidence in or the integrity of a financial market
· False, misleading or deceptive, or unconscionable conduct
· A deliberate course of conduct to enrich themselves at others’ expense
· Conduct shows incompetence, irresponsibility or a high level of carelessness, but with the possibility that the person may develop requisite skills and abilities
· Disregard for the law and compliance with regulations
· Insider trading
· Market manipulation or other misconduct in relation to a financial product traded on a financial market (e.g. s1041A–1041E)
· At least twice being linked to a refusal or failure to give effect to a determination made by AFCA relating to a complaint that relates to a financial services business or credit activities
· Misconduct in relation to financial products or financial services (e.g. s1041F–1041H and Div 2 of Pt 2 of the Australian Securities and Investments Commission Act 2001 (ASIC Act))
· Not acting in the best interests of the client in relation to any personal financial advice given (s961B–961F)
· Failing, in relation to any personal financial advice provided, to give advice that is appropriate (s961G)
· Failing, in relation to any personal financial advice provided, to prioritise the client’s interests (s961J)
· Failing to provide an advice warning where personal financial advice is based on incomplete or inaccurate information (s961H)
· Failing to comply with fee and remuneration obligations in relation to any personal financial advice given (s962–964E)
· Offering or recommending interests in a managed investment scheme that needs to be registered, but has not been
· Carrying on a financial services business without holding an AFS licence
· Failing to perform the functions of an officer of a financial services business
· Controlling a financial services business without the requisite fitness and propriety
· Providing unauthorised financial services
· Providing financial services contrary to s911B
· Failing to keep records that must be kept
· Failing to comply with disclosure requirements, including not disclosing commissions and other benefits or relevant interests and associations
· Unauthorised discretionary trading
· Failure by an officer of the licensee to ensure the licensee complies with its obligations
· Misleading clients about the nature of the products being acquired or disposed of on their behalf that are not for the clients’ benefit
The issues for the Tribunal are:
(a)whether the power to make a banning order under s 920A(1) of the Corporations Act has been enlivened? and, if yes,
(b)whether the Banning Decision should be affirmed, set aside or varied.
This involves a consideration of whether Ms Hawcroft is not a “fit and proper” person pursuant to s 920A(1)(d) of the Corporations Act.
EVIDENCE
All witnesses provided witness statements in addition to their oral evidence. The following evidence was before the Tribunal:
Witness name (in order of appearance)
Mode of attendance
Witness statement/Report
Maree Hawcroft
In person
Applicant First Affidavit dated 21 March 2023; Applicant Second Affidavit dated 4 March 2024; Applicant Third Affidavit dated 24 June 2024
Emma O’Brien
By video
Statement dated 24 June 2024
Meng Meng Wen
By video
Statement dated 23 June 2024
Adam Vieglais
Not applicable
Statement dated 24 June 2024
Rajbir Bains
In person
Statement dated 24 June 2024
No witnesses were called by ASIC.
Maree Hawcroft
Statement of Personal Information
ACN127 and ISG had engaged Law Firm A to act on their behalf in regulatory matters. Ms Hawcroft states she relied on those lawyers to prepare the SPI which she signed. Ms Hawcroft states:[43]
…the trust and reliance that I put in [Law Firm A] was misplaced, as I did discover an error in the form, asked a person at [Law Firm A] to fix it, and to re-send the form (by DocuSign) for me to execute electronically. That form was incorrect, as I have noted above.
I mention the above, not as an excuse, but by way of a background as to how the error occurred. I accept that it is my responsibility to read all forms and make sure they are correct. I sincerely regret missing this error on the form. The consequences from this mistake have been, and have the future potential, to be enormous for me.
[43] TB, p 73, Applicant First Affidavit, p 5, para 29-36.
Ms Hawcroft repeated her evidence given at the ASIC hearing that she had no specific recollection of completing the SPI other than as follows:[44]
a. I received the Statement on or about the morning of 14 October 2022. The Statement was pre-filled by [Law Firm A];
b. At least one of the answers that had been pre-filled (which is one of the errors the subject of the Notice) struck me as being incorrect;
c. I telephoned [Law Firm A] after receiving the pre-filled form. On the basis of my review of emails received from [Law Firm A] (which privilege I explicitly do not waive), I believe that I spoke with a man whom I now know to be [NAME REDACTED], a [REDACTED] at [Law Firm A]. I called and queried the effect of the suspension of the AFSL (amongst other things). I was assured that the Statement was correct, which caused me to doubt my judgment in relation to the form and accept that [Law Firm A] had correctly completed the form;
d. MNHT at pages 126-127 to this affidavit is a copy of a redacted extract of my phone records. The two items highlighted green (item 45 and item 47) are two phone calls made to number "[REDACTED]' which I believe to be [NAME REDACTED] of [Law Firm A]. I did not speak with [NAME REDACTED] during the first call, on the basis of the duration of the call, but I able to say that I spoke to him in the second call, which had a duration of some 112 seconds.
e. My recollection of the conversations regarding this form is that I was either assured it was correct, or when I asked for other changes to be made that I was told that this would occur before the form was resent to me for signing. I trusted these statements when I signed the Statement. My expectation was that my lawyers would get the form correct, particularly after I queried it.
[44] TB, p 74, Applicant First Affidavit, p 6, para 32.
Ms Hawcroft stated she “made a genuine, albeit ultimately unsuccessful attempt to ensure that the document I was signing was correct”.[45]
[45] TB, p 74, Applicant First Affidavit, p 6, para 33.
Ms Hawcroft said she did not intend to mislead ASIC, or anyone who could have viewed the Statement.[46]
[46] TB, p 74, Applicant First Affidavit, p 6, para 34.
In the future Ms Hawcroft intends to take more care to ensure any forms she signs are correct.[47] She states she has been “very cautious” when completing documents and making statements. This is the first time she has been the subject of a banning or other disciplinary proceeding.[48]
[47] TB, p 74, Applicant First Affidavit, p 6, para 35.
[48] TB, p 74, Applicant First Affidavit, p 6-7, para 37.
Ms Hawcroft states Law Firm A made no substantive progress in assisting ISG to comply with its AFSL conditions in order to have its licence suspension revoked, ACN127 and ISG engaged new lawyers to act on their behalf in August 2022. ISG’s suspension was revoked by ASIC on 6 February 2023.
Qualifications and Competence
Ms Hawcroft’s initial witness statement provided that she has been working in the financial services industry since 2006. In a subsequent statement Ms Hawcroft clarified that what she meant by stating she had worked in the financial services industry, is that, prior to joining ISG, she has worked initially as a receptionist, and then later as an executive assistant in companies that operated in the financial sector.[49]
[49] Transcript (“Tr”), p 8-9.
Ms Hawcroft told the Tribunal she had no formal qualifications and initially stated she did not have any accounting experience.[50] In a subsequent statement, Ms Hawcroft stated she “did have extensive accounting experience”.[51]
[50] Tr, p 9.
[51] Exhibit 2 Second Hearing Book (TB2), p 2238, Applicant Third Affidavit dated 24 June 2024 (“Applicant Third Affidavit”), para 12.
The ISG Funds Management Group was founded by Ms Hawcroft and her then de facto partner, Mr Godfrey. The company was a result of a “purchase”. Ms Hawcroft was unable to explain whether that purchase was of the shares in the company. Ms Hawcroft said, “I don’t feel comfortable talking about shares and shareholdings”.[52] Ms Hawcroft later stated she meant she “wasn't able to recall the precise details of a specific entity when asked and didn't feel comfortable answering that with certainty but it would be a simple matter of checking”.[53]
[52] Tr, p 11, line 44.
[53] TB2, p 2238, Applicant Third Affidavit, para 13.
It was put to Ms Hawcroft that as a director of the company, she should have knowledge about the ownership of the company. Ms Hawcroft agreed and explained that in company meetings:[54]
… “if [she did not] understand something, I get it broken down. I understand it. Once I understand it, if it’s an area that I’m not as strong in, I don’t hold that information as well as I hold information in other areas. And that’s what partnerships are about. They’re about – some people have strengths in certain and they have weaknesses in areas… There are areas that I am weak in and this is one of them. And if I needed and understanding of this at any given moment, I would Google it; I would ask a professional around me; I would check my notes…
… Shares and shareholdings, they are a foreign language to me. I don’t have a strong background in financial services, which we’ve already identified.
[Tribunal emphasis]
[54] Tr, p 12.
Ms Hawcroft accepted she did not have a strong background in financial services. She acknowledged she did not consider herself “highly skilled” in law, capital raising, “shareholding”, “higher levels of accounting and taxation law”.[55] Later Ms Hawcroft said what she meant was that she did not have a law degree, or “the same level of skill as a specialised expert the particular [sic] niche areas such as an admitted legal professional or a capital raising specialist”.[56] In Ms Hawcroft’s opinion, her “general knowledge of the legal aspects and the capital raising aspects are sufficient to be a director.”[57]
[55] Tr, p 13.
[56] TB2, p 2239, Applicant Third Affidavit, para 16.
[57] TB2, p 2239, Applicant Third Affidavit, para 16.
Ms Hawcroft stated:[58]
(a)she had daily round-table meetings where all current matters and compliance issues were discussed;
(b)her “experience grew alongside the organisation and due to the rapid sharing of ideas, close-knit working circumstances, and the support structure of having close working relationships with highly skilled professionals”; and
(c)she never felt she was operating outside the scope of her understanding.
[58] TB2, p 2238, Applicant Third Affidavit, para 9-11.
Ms Hawcroft stated her key responsibilities as CFO included:[59]
[59] TB2, p 2239-2240, Applicant Third Affidavit, para 19.
(a)providing financial reports for the quarterly board meeting for the AFSL;
(b)reporting to the Executive Committee regarding any areas of concern or interest with regards to our financial position;
(c)ensuring the risk and compliance management framework is embedded and operational for the group in my internal processes;
(d)training my direct reports to ensure work is of a high standard and compliance needs are understood and being met;
(e)financial Budgeting and Forecasting;
(f)cash Flow Management;
(g)accounts payable / Receivable;
(h)payroll (both setting up staff and running payroll); and
(i)working with key personnel in the business to understand the financial components of their business needs (for example a standing desk or ongoing programming support through an external provider).
Ms Hawcroft believes:
(a)she had appropriate training and experience to perform her role and comply with regulatory requirements; and
(b)her “knowledge and experience was constantly being supplemented by the key professionals around me who specialised in key areas of commercial law, compliance and high level tax accounting”.[60]
[60] Tr, p 97, lines 46-47; p 98, lines 1-5.
Ms Hawcroft stated she prepared the majority of the financial reports for the board.
Ms Hawcroft stated she had daily discussions with the CEO, and, as part of the Executive Committee, was involved in all strategic planning.
In her statement Ms Hawcroft set out her experience in retail and in other companies prior to commencing with ISG.
Adam John Vieglais
Mr Vieglais did not appear at the hearing but provided a witness statement. ASIC did not object to the tender of Mr Vieglais’ statement.
Mr Vieglais is a registered accountant. He has known Ms Hawcroft for 10 years.
Mr Vieglas owned an accounting business that provided taxation lodgment services and advice to the ISG Group.
Mr Vieglais observed Ms Hawcroft performing her role as a bookkeeper. In Mr Vieglais’ opinion Ms Hawcroft:[61]
(a)appeared competent;
(b)ensured her knowledge grew “with the growth of the organisation(s) to ensure she could meet her reporting obligations as CFO”;
(c)prepared highly detailed reports;
(d)always had another person review and sign off any documents she prepared.
[61] TB2, p 2250-2251, Affidavit of Adam John Vieglais.
Meng Meng Wen
Mr Wen is a bookkeeper. Between November 2020 to December 2022, he worked at ISG under Ms Hawcroft’s supervision.
In Mr Wen’s opinion Ms Hawcroft:[62]
(a)“has demonstrated a high level of competency”;
(b)provided him with invaluable guidance on “the ins and outs of managing the company's payroll, payables, and receivables”;
(c)appeared to possess “extensive knowledge and understanding of the financial services sector”;
(d)has been diligent and prudent in managing the company's finances;
(e)“never hesitated to leverage the expertise of professionals in areas such legal, tax and compliance”; and
(f)is competent to remain as a director of ISG.
[62] TB2, p 2252-2253, Affidavit of Mengmeng Wen.
Emma O’Brien
Ms O’Brien is a human resource business partner. On 1 November 2021, Ms O’Brien was employed at ISG Funds as the human resources adviser and reported directly to Ms Hawcroft.
In Ms O’Brien’s experience:[63]
(a)Ms Hawcroft was a “well-rounded and experienced business leader”;
(b)Ms Hawcroft provided her with training and emphasised accuracy;
(c)Ms Hawcroft’s leadership contributed to a positive work environment; and
(d)Ms Hawcroft was dedicated to fairness, support and employee well-being.
[63] TB2, p 2254-2255, Affidavit of Emma O’Brien.
Rajbir Bains
Ms Bains has been a chartered accountant since 2009.
Ms Bains was employed by Ms Hawcroft in November 2020 for Omega Investment Holdings where she worked as a financial accountant. Ms Bains worked on the accounts for ISG Funds Management.
In Ms Bains experience Ms Hawcroft:[64]
(a)provided her with training on the business and on completing the financial reporting required for the quarterly board meetings (which involved completing consolidated balance sheets, the consolidated profit and loss statements and consolidated cash flow statements for over six entities).
(b)“was still able to explain the reporting, day to day management and board meeting processes to me, just like someone who did have a financial qualification”;
(c)displayed a “high reasonable understanding of financial services”;
(d)“would review all the bank accounts daily and ensure that she was aware of all bank movements”;
(e)was “in regular contact with the external tax accountants”;
(f)was a good mentor; and
(g)“acted in an honest manner, and she is fit and proper to be a director of a financial services company”.
MS HAWCROFT’S SUBMISSIONS
[64] TB2, p 2256-2258, Affidavit of Rajbir Bains.
Errors in SPI
Ms Hawcroft submitted that:[65]
[65] Applicant Statement of Facts, Issues and Contentions, (“ASFICS"), para 46-70.
(a)what occurred in relation to the SPI was an error resulting from an oversight;
(b)there are no features present which would give rise to a finding that Ms Hawcroft is not a fit and proper person;
(c)there is no evidence of a gross disregard of obligations;
(d)upon awareness she promptly corrected the error;
(e)she has not been the subject of any disciplinary or banning order and has never had any formal complaint made against her since she commenced practice in 2006;
(f)the error was “out of character” and was in the context of having legal oversight;
(g)there is no moral or dishonesty finding against her;
(h)for the purpose of general, rather than a specific, deterrence to others, it is a “severe punishment” and “reputationally damaging” for Ms Hawcroft;
(i)her circumstances are distinguishable from other matters where Banning Orders have been made;
(j)it is not clear what needs to be deterred; and
(k)this was an isolated event and involved no damage or loss to clients.
Competence
In relation to her competence, Ms Hawcroft submitted:[66]
2.…Whilst it is true that I do not hold formal qualifications, I have significant experience as a senior manager and director of a financial services firm. Throughout the SSFIC the Respondent refers only to my experience prior to working for ISG; more than ten years ago. Since that time, I have gained significant experience; building my skills and knowledge of the industry over time before coming into the more complex and senior roles COO, CFO and director.
3. As at June 2024, I have significant experience in senior roles in the financial services industry
5. …there is nothing unusual or inappropriate in a director of an AFSL conducting their own research or seeking advice from a professional with specialized knowledge, in relation to technical areas or matters outside their area of expertise.
6. The assumption that a director or senior manager of a financial services firm should have total and complete knowledge of all aspects of financial services is simply not reasonable, and is not a standard that applies to determining whether a director is a ‘fit and proper’ person or competent to operate a financial services firm…
[emphasis added]
[66] Applicant’s Supplementary Statement of Facts, Issues and Contentions (“Supplementary ASFICS”).
Ms Hawcroft refuted ASIC’s allegations she did not have appropriate qualifications, training, experience, and knowledge. She submitted “I fully understand these documents and am prepared to face cross examination with regard to my understanding, in relation to these documents. I applied my own mind and critical judgment when signing all [company] documents.”[67]
[67] Supplementary ASFICS, p 4, para 15.
During closing submissions Ms Hawcroft submitted that the witnesses called on her behalf gave evidence which supported a finding that Ms Hawcroft had a reasonable understanding of financial services.
Representations
On or around 20 April 2021, ISG prepared a proof for a licensing amendment application to ASIC in respect of ISG’s AFSL. The proof provided:[68]
Maree Hawcroft was appointed as a Director of ISG on 1 November 2019. Maree is ISG’s current Chief Operating Officer.
Maree has 10 years’ corporate experience working with several high-profile organisations including Goldman Sachs, BNY Melon and Stonehage Flemming. During this time, she has worked across a variety of departments; including Human Resources, Sales, Marketing, Facilities and Compliance. ......
(v) In her previous employment, Maree has had firsthand involvement with several company mergers....
......
(vii) Maree’s credentials include:
.....
(B) Large corporate experience working for Goldman Sachs, Bank of New York Melon, Stonehage Flemming and Holcim.
[68] TB, p 1247 (1398).
The ISG Group website provides that Ms Hawcroft has “10 years corporate experience working with several high-profile organisations”.[69]
[69] T-Docs, p 634; TB, p 885.
This description of Ms Hawcroft’s experience was also found in ISG’s product disclosure statements (PDS).
Ms Hawcroft did not address the issue of whether these representations were misleading and deceptive, as asserted by ASIC, in her written closing submissions.
In closing oral submissions Ms Hawcroft submitted the representations were not misleading and that they had been checked by a compliance committee.
ASIC’S SUBMISSIONS
Fit and Proper
In terms of what means to be fit and proper ASIC summarised the authorities as follows:[70]
44. In that regard, a regulated person should hold themselves to a higher standard than the general public: Toohey and Tax Agents Board of Victoria [2009] AATA 603 at [36]. A lack of rigour in a regulated person’s conduct can reflect badly on one’s commitment to competent and conscientious behaviour that one would expect of a regulated person: Middlebrook v Tax Practitioners Board [2020] AATA 3698 at [30]. A failure to perform adequately or properly the duties of a regulated person will, without more, demonstrate that the person is not a fit and proper person to have the privilege of working in that industry: Hill and Members of the Companies Auditors and Liquidators Disciplinary Board and ASIC [2015] AATA 447 at [18].
45. A person in a regulated role will not be a fit and proper person if they are not able to prepare statutory forms in a competent manner and they are not able to competently deal with any queries which may be raised by officers of the regulator. The regulator must be able to proceed on the footing that statutory forms which are lodged by them have been prepared competently: Re Su and Tax Agents’ Board of South Australia (1982) 61 FLR 1 at [95]. A regulated person’s dealings with a regulator are a relevant indicator of fitness. The regulator must be able to trust and accept that the regulated person has prepared forms which are true and accurate: Stasos v Tax Agents Board of NSW(1990)21 ATR 974 at 983-984. A failure to meet one’s statutory obligations can result in a lack of fitness and proprietary even if there is no dishonesty: Re Su and Tax Agents’Board of South Australia(1982) 61 FLR 1.And see also Proh v Tax Agents’ Board of Victoria(2010) 78 ATR 663 and Shmuel and Tax Practitioners Board [2019] AATA 2168 at [23].
48.“Fitness” is not confined to a consideration of past misconduct: Sleiman and ASIC [2007] AATA 1383 at [86] and the authorities cited therein. A person can also fail to demonstrate that they are a fit and proper person even in the absence of an apprehension of the actual probability of future misconduct: Sleiman and ASIC [2007] AATA 1383 at [89].
[70] Respondent Statement of Facts, Issues and Contentions (“RSFICS”).
The Tribunal notes that the Guide provides that even if a person had rectified breaches or taken steps to prevent further non-compliant conduct, such as by completing additional training, a ban may still be imposed to deter misconduct by others.[134]
[134] RG98, 56, citing Australian Securities and Investments Commission v McCormack [2017] FCA 672; 160 ALD 155, at [47].
Conclusion
ASIC plays an important role in society in ensuring that those providing financial services are “fit and proper” and competent. This protects the unsuspecting community at large. One of the objects of Chapter 7 of the Corporations Act is to promote fairness, honesty, and professionalism by those who provide financial services (s 760A).
The Court in Australian Securities and Investments Commission v Hutchison [2020] FCA 978 described the object of Chapter 7 of the Corporations Act as follows:
…protection of consumers is central, but the object recognises that such protection and the minimisation of risk is facilitated in a number of ways: by the promotion of fairness, honesty and professionalism by 'those who provide financial services'; by ensuring there is transparency in the market and by reducing systemic risk…
While there is negligible risk arising from the SPI errors, there is the potential for the unsuspecting public being exposed to harm if a banning order is not made given the Tribunal’s concerns around competency and fitness. A final banning order decision will have the impact of providing a personal and general deterrence to others.[135] It may ensure care is taken to the appointment of relevant officers of financial services businesses.
[135] XTWK and Australian Securities and Investments Commission (2008) 105 ALD 596 at [74].
Protection of the public is a paramount consideration of the Tribunal in determining whether to exercise its discretionary powers under s 41(2) of the AAT Act.
The Tribunal finds Ms Hawcroft’s conduct in relation to the completion of the SPI was at the lower end of the scale in terms of seriousness for the following reasons:
(a)the conduct was the result of carelessness or inadvertence;
(b)Ms Hawcroft attempted to remedy the contravention in a timely manner once informed; and
(c)there was no evidence that any actual harm to customers had been caused by Ms Hawcroft’s conduct.
Considering Table 3 of the Guide, Ms Hawcroft’s conduct fell into the “banning for less than 3 years’ category” and “a banning order of one year is appropriate. A banning period at the lesser end of the scale is also intended to avoid unduly punishing Ms Hawcroft”.[136]
[136] TB, p 154.
The Applicant has held the highest positions within ISG as a director, Chief Financial Officer, and Chief Operating Officer. She was also a director of Oracle.
It was not apparent on the evidence that Ms Hawcroft had a sufficient level of financial literacy required for the roles she had in ISG. This knowledge and responsibility cannot be delegated to external service providers such as lawyers and accountants.
During cross-examination, the Applicant acknowledged she does not have a strong skillset in fields relevant to the financial services industry.
The representations made in the publicly available marketing material were inaccurate and had the potential to mislead.
Ms Hawcroft has signed official documents in her capacity as a director, Chief Financial Officer, and Chief Operating Officer of ISG. As ASIC submitted, this was done “without appropriate qualifications, training, experience and knowledge and with consciousness of that deficiency.”[137]
[137] Supplementary RSFICS, p 15, para 50.
Ms Hawcroft has not demonstrated basic accounting knowledge, and her evidence indicates a lack of understanding of matters relevant to operating an AFSL.
It should be noted that Ms Hawcroft is not banned from being a director or officer of any company, only those carrying on a financial services business.
In relation to Ms Hawcroft’s competence and the misleading representations, this conduct falls more within the banning for 3-10 years category within Table 3. Conduct in this category is described in the Guide as including:
(a)“controlling a financial services business without the requisite fitness or propriety”;
(b)“false, misleading or deceptive, or unconscionable conduct”; and
(c)here “conduct shows incompetence, irresponsibility or a high level of carelessness, but with the possibility that the person may develop requisite skills and abilities”.
Overall, a ban of one year is at the very low end of the scale. ASIC did not submit that the length of the ban should be increased.
In these circumstances the Tribunal finds the correct or preferrable decision is that the Banning Order was appropriate. The decision under review is affirmed.
DECISION
The decision under review is affirmed.
I certify that the preceding 257 (two hundred and fifty-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member D K Grigg
..................[SGD].........................
Associate
Dated: 9 October 2024
Date(s) of hearing: 19 March 2024, 24-25 July 2024, 21 August 2024 and 1 October 2024
Counsel for Ms Hawcroft: Mr N Coburn
Solicitors for Ms Hawcroft: Not applicable
Counsel for the Respondent: Dr P Bender
Solicitors for the Respondent: Administrative Law Team, Legal Services, ASIC
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