JSKN and Australian Securities and Investments Commission

[2017] AATA 818

JSKN and Australian Securities and Investments Commission [2017] AATA 818 (1 June 2017)

Division:TAXATION & COMMERCIAL DIVISION

File Numbers:         2016/4215 & 2016/4216

Re:JSKN

APPLICANT

AndAustralian Securities and Investments Commission

RESPONDENT

DECISION

Tribunal:Senior Member T. Tavoularis

Date:1 June 2017

Place:Brisbane

Both of the decisions under review are affirmed.

.................[sgd].........................

Senior Member T. Tavoularis

Catchwords

CORPORATIONS – Applicant was mortgage broker - engaging in credit activity – fraudulent and dishonest conduct - permanent banning order imposed – whether contravention of credit act – whether likely to contravene credit act in future – decision under review affirmed

CORPORATIONS – Applicant was mortgage broker - providing financial services – fraudulent and dishonest conduct - permanent banning order imposed – whether power to ban in corporations act enlivened - whether of good fame and character – decision under review affirmed

Legislation

Australian Securities and Investments Commission Act 2001 (Cth) s 1(2)(b)
Corporations Act 2001 (Cth), ss 9, 760A, 920A, 920B

National Consumer Credit Protection Act 2009 (Cth), ss 5, 80, 81, 160D

Cases

ASIC v Lord (1991) 105 ALR 347
Childs v ASC (1996) 20 ACSR 196
Irving v Minister for Local Government and Ethnic Affairs (1996) 139 ALR 84
Liu v Australian Securities and Investments Commission [2014] AATA 817
Pollard v Commonwealth DPP (1992) 28 NSWLR 659
Prevato v Governor, Metropolitan Remand Centre and Others (G6 of 1986) and Prevato v Miszalski and Another (G16 of 1986) (1986) 64 ALR 37
Prothonotary of the Supreme Court of NSW v Alcorn [2007] NSWCA 288
Prothonotary of the Supreme Court of NSW v P [2003] NSWCA
Sahay v ASIC [2016] AATA 583

Shi v Migration Agents Registration Authority (2008) 235 CLR 286

Secondary Materials

ASIC Regulatory Guide 98 - Licensing: Administrative action against financial service providers
ASIC Regulatory Guide 204 – Applying for and varying a credit licence

ASIC Regulatory Guide 218 - Licensing: Administrative action against persons engaged in credit activities

REASONS FOR DECISION

Senior Member T. Tavoularis

1 June 2017

INTRODUCTION

1. The Applicant[1] has 17 years’ experience working as a mortgage broker. [2]  On 18 July 2016, the Australian Securities and Investments Commission (“the Respondent” or “ASIC”) made two orders, as follows:  

   a.permanently prohibiting the Applicant from engaging in any credit activity pursuant to ss 80 and 81 of the National Consumer Credit Protection Act 2009 (Cth) (“the Credit Act”);[3] and

   b.permanently banning the Applicant from providing any financial services pursuant to ss 920A and 920B of the Corporations Act 2001 (Cth) (“the Corporations Act”).[4]

   [1] The Applicant’s name was suppressed pursuant to the s 35 Confidentiality Order granted at the commencement of the hearing.

   [2] The Applicant was a mortgage broker and credit provider between 1997 and 2014.

   [3] Order made pursuant to s 80(1)(c) of the Credit Act.

   [4] Order made pursuant to s 920A(1)(c) of the Corporations Act.

2. On 10 August 2016, the Applicant sought review of both abovementioned decisions.  It is the review of both of these decisions that is presently before the Tribunal.

1. The background to this matter is adequately summarised in the Respondent’s Statement of Facts, Issues and Contentions.[5] Suffice it to say that two material factors should be noted for present purposes:

   a.    the Applicant conducted her mortgage broking activities under the guise of a company of which the Applicant was, at all material times, the guiding mind and spirit;

   b.    during the period 1 July 2010 and  4 April 2014, the Applicant acting as the sole director of the company was a duly appointed credit representative of Aussie Home Loans.[6]

   [5] See Exhibit 4, Respondent’s Statement of Facts, Issues and Contentions (“SFIC”), [2]-[3].

   [6] AHL Investments Pty Ltd trading as Aussie Home Loans (ACN 105 265 861) (Australian Credit Licence No 246786).

   RELEVANT FACTS

2. There is no requirement upon the Tribunal to make any findings of fact in the determination of the review of those decisions.  As part of a sentencing regime imposed upon her at the Magistrates Court on 3 June 2016, the Applicant signed a statement[7] confirming her adoption of an agreed factual matrix giving rise to a penalty that, in turn, spawned the two decisions presently under review.

[7] See Exhibit 5, T Documents, Tab 8, pages 62–78.

1. The specific conduct that attracted the attention of the Police and now the Respondent occurred during the period 10 May 2013 and 25 February 2014. The conduct is constituted by the Applicant’s endeavours to secure loan facilities for eight borrowers in her capacity as a credit representative of Aussie Home Loans.

1. This conduct involved the Applicant’s provision of documents to Westpac,[8] specifically, letters detailing the employment of each proposed borrower that were false in a material particular. This conduct comprises a clear and unequivocal breach of s 160D(2) of the Credit Act.

[8] Westpac Banking Corporation (ACN 007 457 141 Australian Credit Licence 233714).

1. The loans were all sought to finance the purchase of residential property. This required the Applicant to facilitate completion of usual and necessary loan applications and to locate or procure additional, usual and necessary ancillary documents. The offending in question relates to the obtaining or procurement of letters primarily relating to the proposed borrower’s income in order to demonstrate serviceability of a loan to the ultimate lender, Westpac.

2. In essence, the Applicant’s unlawful conduct was in response to an apprehension she had in relation to the respective capacity of each of the borrowers to properly service their loans. The ultimate objective of the conduct was to induce Westpac to grant each loan.

1. In all eight mortgage applications the Applicant created, or purported to create, false employment letters for mortgage applicants. The Tribunal heard evidence that the Applicant procured her daughter to assist in the formulation and production of these letters. As I understand the evidence, in six of the eight applications the Applicant knew that the documents were false in one or more material particular. For example, the Applicant knew the income cited was overstated or the recorded employment status was inaccurate.

2. The Tribunal also heard evidence that many of the Applicant’s clients were either self-employed, worked part-time, or were paid partly in cash and partly “through the books” of the stated employer. Knowing the “through the books” income figure would likely not meet the serviceability requirements of Westpac, the Applicant caused the income figure and/or employment status of each applicant to be changed to ensure it would.

3. As I further understood the evidence, the Applicant’s conduct in preparing the remaining two applications involved conduct that was found to be reckless. For example, in one of these two letters, it had the appearance of coming from an employer. However, that particular letter was a fabrication of the Applicant and, in addition, the Applicant forged the signature of the putative employer and then presented it to Westpac with the relevant loan application. The Applicant, in effect, “wrote her own story” and knowingly pretended it was from someone else (the employer) to ensure serviceability of the loan could be demonstrated to Westpac.

4. This astonishingly brazen conduct was intended to induce Westpac to advance an aggregate sum of $2,720,400.  As things transpired, only five of the eight applications were disbursed. Three loans did not proceed. In the end, the actual total sum advanced by Westpac was $1,608,400.  A balance of loan funds totalling $1,112,000 were not disbursed.  Commissions in the sum of $6,847.53 were paid to the Applicant.[9]

   [9] This figure for commissions does not include future or “trailings” commissions usually payable to the company for the life of those loans.

   THE ISSUES BEFORE THE TRIBUNAL

5. The Tribunal’s broad role is to review ASIC’s decisions, to hear the matter afresh, and to arrive at the correct or preferable decision regarding two questions:

   (i)whether the Applicant should be permanently prohibited from providing financial services?

   (ii)whether the Applicant should be permanently banned from engaging in any credit activity?

6. The Tribunal’s more specific role is to adjudicate upon the appropriateness of the length of any ban to be imposed on this Applicant.

   THE TRIBUNAL’S TASK

7. The Tribunal’s role is to arrive at a correct or preferable decision. This does not involve a mere assessment of whether the delegate’s decision was right or wrong.  The Tribunal must repeat the entire exercise in terms of the decision-making process.   The Tribunal must consider the matter afresh and arrive at its own conclusion via an independent assessment and determination of the issues, while addressing the same question(s) that was before the original decision maker. It is not an exercise involving the finding of any error(s) in the decision(s) under review but, indeed, an entirely fresh hearing of the issues.[10]

   [10] See Shi v Migration Agents Registration Authority (2008) 235 CLR 286, [140-142].

8. The Applicant represented herself at the hearing. A cursory examination of the transcript will reveal several adjournments for the purpose of settlement discussions during the course of the hearing. A number of those adjournments were at my suggestion because of what I thought was the Applicant’s fundamental misconception about (a) how the Tribunal is compelled to deal with this Application (ie afresh) and (b) the fact that the legislative regime relating to her offending and the resulting penalty imposed upon her in the Magistrates Court does not ultimately govern or otherwise guide a decision-maker in this matter.  When sentencing the Applicant in the Magistrates Court, the presiding Magistrate, told her:

   “… taking into account that immediate and devastating impact since the charges were laid meaning you’ve lost your income and you’ve lost your career I still think that a fine is the most appropriate penalty ...”[11]

   [11] Exhibit 5, T  Documents, page 98.

9. When outlining the actual penalty, the learned Magistrate also said:

   “… to set what might be the proper penalty in terms of your situation not attracting any form of imprisonment, but on the other end equally it’s sufficiently serious that I reject consideration of something like a good behaviour bond.  In the middle of the range is the appropriate penalty.  And so you are convicted and fined as follows: on each of the first seven charges you’re fined $1,000. For charge eight $1,500, or otherwise a global penalty of $8,500 with necessarily a conviction recorded.  I’ll leave the time to pay at one month…” [12]

   [12] See Exhibit 5, T documents, pp 98 – 99.

10. The Applicant appeared to be of the view that because her offending in the Magistrates Court was punished by a fine amounting to little more than the totality of the commissions, this Tribunal would somehow feel inclined or compelled to adopt a similar approach to the determination of the length of any ban it imposed. In other words, I took the impression from the hearing that the Applicant thought the sentence she received in the Magistrates Court could somehow be “superimposed” on to the present decision-making process for this Tribunal.  For reasons appearing below, that apprehension was, to my mind, clearly misplaced.

1. The regime to be followed by this Tribunal involves an assessment of whether ASIC’s order to permanently ban the Applicant is the proper order in all of the circumstances, having regard to the protection of the public, specific and general deterrence, and the desire to maintain public confidence in the profession.[13] Regard must be had to the factors appearing in established authority,[14] and ancillary guides to applicable legislation.[15]

   [13] Horwarth v ASIC [2008] AATA 278 at [180].

   [14] ASIC v Adler (2002) 42 ACSR 80 at [55-56].

   [15] ASIC Regulatory Guide 98 - Licensing: Administrative action against financial service providers (as updated most recently in July 2013).

   THE CREDIT ACT

2. ASIC (and thus the Tribunal) has the power to make a banning order in relation to a person engaging in credit activity. This power is derived from s 80 of the Credit Act.

3. The power to ban can be enlivened by a range of circumstances, most relevantly, in this case, the power is enlivened if a person is convicted of fraud.[16] There is no definition of the term “fraud” in the Credit Act. However, the term “serious fraud” is defined within s 5 of the Credit Act to mean:

   ““serious fraud” means an offence involving fraud or dishonesty, being an offence:

   (a)  against a law of the Commonwealth, or of a State or Territory, or any other law; and

   (b)  punishable by imprisonment for life or for a period, or maximum period, of at least 3 months.”

   [16] See Credit Act s 80(1)(c).

4. The Applicant pleaded guilty to eight counts of contravening s 160D of the Credit Act which provides for a period of imprisonment of up to two years. There can therefore be no doubt that the Applicant’s contravention of s 160D of the Credit Act constitutes “serious fraud” for the purposes of s 5 of the Credit Act and, in turn, s 80(1)(c) of that Act.

5. There is likewise little or no doubt that the definitive phrase in s 5 of the Credit Act referring to “an offence involving fraud or dishonesty” encapsulates offences that involve an element of fraud or dishonesty.  The offending need not manifest itself as actual offences of fraud or dishonesty.[17]

[17] See Pollard v Commonwealth DPP (1992) 28 NSWLR 659; ASIC v Lord (1991) 105 ALR 347; Childs v ASC (1996) 20 ACSR 196.

1. The Applicant contended she has not committed “serious fraud” because the Magistrates Court sentencing regime did not include a period of incarceration and also because the penalty imposed was less than the maximum penalty.[18] That contention is misplaced and incorrect due to the use of the word “punishable” in s 5 of the Credit Act. This means the actual penalty imposed by the Magistrate is of no relevance to the definition of “serious fraud” for present purposes. It need only be demonstrated that each of the offences for which the Applicant has been convicted carry a possible penalty of imprisonment for a period in excess of three months.[19]  [my emphasis].

   [18] Exhibit 1:  Applicant’s Statement of Facts, Issues and Contentions (“SFIC”), p 10 of bundle.

   [19] Adopting the wording of Deputy President Constance in Sahay v ASIC [2016] AATA 583 at [32].

2. Looked at another way, and with specific reference to the words in s 5 of the Credit Act, previous authority has held “punishable by imprisonment for life or for a period, or maximum period, of at least 3 months”, to mean:

   “… the offence must, in law, be able to be punished by such a term. [ie 3 months].  An offence is so able notwithstanding that it may also be able to be punished by imprisonment for a lesser term. Such an interpretation not only accords with the natural meaning of the words but is sensible in application.”[20]

   [20] Prevato v Governor, Metropolitan Remand Centre and Others (G6 of 1986) and Prevato v Miszalski and Another (G16 of 1986) (1986) 64 ALR 37 per Wilcox J.

3. The evidence thus points me to a finding that the Applicant has been convicted of an offence involving fraud or dishonesty; that such offence is an offence against a law of the Commonwealth or of a State or Territory or any other law; and that such offence is punishable by a period of at least three months imprisonment.[21] I therefore find that both ASIC and this Tribunal have the power to make a banning order against the Applicant under s 80(1)(c) of the Credit Act.

   [21] Namely, the Applicant was convicted of eight counts of breaching s 160D of the Credit Act, which involves giving misleading information, and has a penalty of up to two years imprisonment.

4. The power to make a banning order is also enlivened pursuant to s 80(1)(d) of the Credit Act, if “a person has contravened any credit legislation”. There is no doubt the Applicant’s breach of s160D of the Credit Act clearly constitutes contravention of “credit legislation” in accordance with that subsection.

5. Additionally, the power to make a banning order is similarly enlivened by s 80(1)(f) of the Credit Act, if “ASIC has reason to believe that the person is not a fit and proper person to engage in credit activities”.

6. An assessment of whether someone is a fit and proper person to engage in credit activities requires consideration of s 80(2) of the Credit Act, which relevantly provides:

   “(2)     For the purposes of paragraphs (1)(e) and (f), [of the Credit Act] ASIC must (subject to Part VIIC of the Crimes Act 1914) have regard to the following:

   ……

   (c)  any criminal conviction of the person, within 10 years before the banning order is proposed to be made”.

7. An additional reference point for the assessment of whether a person is fit and proper to engage in credit activities can be found in ASIC’s Regulatory Guide 204, specifically, RG 204.177:

   “To be a fit and proper person to engage in credit activities means that the person:

   (a)    is competent to operate a credit business (as demonstrated by the person’s knowledge, skills and experience);

   (b)    has the attributes of good character, diligence, honesty, integrity and judgement;

   (c)    is not disqualified by law from performing their role in your credit business; and

   (d)    either has no conflict of interest in performing their role in your credit business, or any conflict that exists will not create a material risk that the person will fail to properly perform their role in your credit business.”

8. Having regard to the respective provisions of s 80(2)(c) and RG 204.177, as stated above, I find this Applicant was:

   ·convicted of a criminal offence within 10 years before the banning order was made by ASIC; and

   ·the nature and extent of the Applicant’s offending is such as to preclude any presumption or finding that she possesses the attributes of good character, diligence, honesty, integrity and judgement to demonstrate she is a fit and proper person to continue engaging in credit activities.

9. Accordingly, I am of the view that the power to make a banning order is appropriately enlivened in this matter pursuant to s 80(1) under subsections (c), (d) and (f). I note the non-cumulative nature of s 80(1) of the Credit Act, such that only one of these subsections needed to apply to enliven the power to make a banning order.

   THE CORPORATIONS ACT

10. ASIC also has the power to make a banning order in relation to the provision of financial services under s 920A of the Corporations Act. Similar to the Credit Act that power is enlivened, pursuant to s 920A(1)(c) of the Corporations Act, if “the person is convicted of fraud”.

11. Similar to its Credit Act sibling, the Corporations Act does not contain a definition of “fraud” simpliciter but does contain a definition of “serious fraud” in s 9. That definition is very similar to the definition in the Credit Act:

    ““serious fraud” means an offence involving fraud or dishonesty, being an offence:

    (a)  against an Australian law or any other law; and

    (b)  punishable by imprisonment for life or for a period, a maximum period, of at least 3 months.”

12. For present purposes, I find this Applicant has been (1) convicted of an offence involving dishonesty; (2) that such offence contravened an Australian law; and (3) the offence was punishable for a period of at least three months.[22] I consequently find the Applicant has been convicted of “serious fraud” pursuant to the definition in

    
    

    s 9 of the Corporations Act. It follows that the Applicant has been convicted of fraud such as to validly enliven the banning power under s 920A(1)(c) of the Corporations Act.

[22] As stated above, the Applicant was convicted of eight counts of breaching s 160D of the Credit Act, which involves giving misleading information, and has a penalty of up to two years imprisonment.

1. The power to make a banning order can also be enlivened under s 920A(1)(d) of the Corporations Act “if [there is] reason to believe that the person is not of good fame or character”.

1. The very significant consequence of such a finding is that it has implications for the period of the ban imposed. Section 920B(2) of the Corporations Act specifies that a banning order can either prohibit the person from providing financial services permanently or for a specified period. However, by operation of the wording in

   
   

   s 920B(2)(b) ASIC must issue a permanent banning order if there is reason to believe that the person is not of good fame or character. Consequently, I must proceed to address the following two issues:

   (i)    Whether there is reason to believe this Applicant is not of good fame and character; and

   (ii) How the provisions of s 920B(2) of the Corporations Act operate in relation to the length of any ban.

   ASSESSMENT OF WHETHER THE APPLICANT IS OF GOOD FAME AND CHARACTER

2. In determining whether an applicant is of good fame and character, AISC (or the Tribunal) must consider the relevant factors appearing at s 920A(1A) of the Corporations Act. In this particular matter, the factors that have direct relevance are:

   “(a)    any conviction of the person, within 10 years before that time, for an offence that involves dishonesty and is punishable  by imprisonment for at least three months; and

   (b)     whether the person has held an Australian financial services licence that was suspended or cancelled.

   ….

   (d) any other matter ASIC [the Tribunal] considers relevant.”

3. For reasons stated earlier, the circumstances and sentencing regime arising from the Applicant’s eight convictions for breaches of s160 of the Credit Act are squarely within relevant factor (a) above. I also consider it relevant that the Applicant’s appointment as an authorised credit representative of Aussie Home Loans was terminated with effect from 4 April 2014.[23]  Although not immediately apparent from the material, one could not imagine any continuation in the operative effect of the Applicant’s Australian financial services licence in these circumstances without the concurrence or support of Aussie Home Loans (or its equivalent).

   [23] Exhibit 5: T Documents, Statement of Applicant made on 15 February 2016, Tab 8, p 64, [8].

4. Although the concept of “good fame and character” is not defined in the Corporations Act, recourse may be had to previous authorities. The authorities identify a difference between a person’s enduring qualities apparent within themselves, as opposed to just how that person is viewed – usually in reputational terms – by his or her peers in the general community.

5. The term “fame” refers to a person’s reputation in the relevant community, while “character” derives more from a person’s actual nature.[24] This theme of character being found in the inherent nature of an individual has been ventilated in both State and Commonwealth jurisdictions. The New South Wales Court of Appeal thought an assessment of whether a person is of good fame and character involves a consideration of “matters affecting the moral standards and attitudes and qualities” of the person rather than a mere noting of that person’s reputation in the community. [25]

[24] See Prothonotary of the Supreme Court of NSW v P [2003] NSWCA 320 at [17] per Young CJ.

[25] Prothonotary of the Supreme Court of NSW v Alcorn [2007] NSWCA 288, at [58] per Holden J.

1. Similarly, in assessing good fame and character, the Commonwealth Courts have tended towards an evaluation of a person’s moral qualities rather than a cursory allusion to general repute.  The inquiry seems to be one concerned with an analysis of choices made by the person relative to certain conduct under examination and the outcomes resulting from that conduct:

   “…. the words “good character” should be taken to be used in the ordinary sense, namely, a reference to the enduring moral  qualities of a person, and not to the good standing, fame or repute of that person  in the community.  The former is an objective assessment apt to be proved as a fact, while the latter is a review of subjective public opinion... A person who has been convicted of a serious crime and thereafter held in contempt in the community, nevertheless may show that he or she has reformed and is of good character … Conversely, a person of good repute may be shown by objective assessment to be a person of bad character.”[26]

   [26] Irving v Minister for Local Government and Ethnic Affairs (1996) 139 ALR 84 at 94 per Lee J.

2. To my mind, this Applicant’s demeanour and general outlook leads me to think that in both her client community and broader community, she is most likely a person of good repute, respected as both a motivated and service-driven mortgage broker and a reputable member of the community.  It is not by accident that she has remained in and established a viable and strong credit services business over the last twenty or so years.  She seems clearly focused on the needs of her clients and I think it is fair to say that in servicing her clients, she may have been prepared to go “the extra mile” for them to make sure a loan deal was finalised.

1. Such dedication carries both positive and negative connotations. On the positive side, consumers of her no doubt first rate service would have derived the benefit of a solid and motivated finance broker working hard for them.  On the negative side – and this is where my misgivings about her conduct reside – I think her devoted approach to servicing those clients may very well have loosened the fixed scope of her moral compass leading her to seriously, and perhaps fatally, commit the offences for which she has been convicted on her own plea.

1. The Respondent, to my mind, rightly contends that any assessment of a person’s fame and character, for the purpose of ss 920A(1)(d) and 920B(2) of the Corporations Act, ought be made in the context of Chapter 7 of the Corporations Act dealing, as it does, with “financial services and markets”. Chapter 7 is primarily concerned with the promotion of fairness, honesty and professionalism by providers of financial services.[27] ASIC sees its role as a promoter of the confidence and informed participation of investors and consumers in the financial system.[28] 

[27] See Corporations Act s 760A(b).

[28] See Australian Securities and Investments Commission Act 2001 (Cth) s 1(2)(b).

1. This Tribunal has similarly sought to endorse the legislative role of ASIC in maintaining high levels of  public and professional confidence in those entrusted with the provision of financial and associated services:  

   “It is [also] important for the public to have confidence in the regulation of the financial services industry and for the regulator to send a message to other financial services providers about the significance of compliance with the financial services laws”.[29]

[29] Liu v Australian Securities and Investments Commission [2014] AATA 817 at [121] per SM Redfern.

1. As it is entitled to do, the Respondent contends there is reason to believe the Applicant is not of good character for the purposes of ss 920A(1)(d) and 920B(2) of the Corporations Act.[30] The reasons cited by the Respondent in support of that contention are compelling. Expanding on those contentions, I must reiterate that:

   [30] See Exhibit 4, Respondent’s SFIC, at [50].

   a.On any reasonable and objective analysis, the Applicant’s offending constituted a serious breach of the trust reposed in her by a major lending institution of this country, namely Westpac.

   b.The conduct was of a prolonged nature – 9 months. The relevant letters evidencing the asserted “employment” for a given mortgage applicant’s finance were knowingly created or procured by the Applicant. The conduct involved knowingly providing false and misleading information to Westpac in relation to the mortgage applicants’ employment status and income, to induce the bank to advance funds in accordance with approved loans to her clients. On at least one of these occasions, the inducing conduct was entirely orchestrated and executed by the Applicant, involving the fraudulent application of her signature in lieu of the putative employer.  

   c.Although the Applicant’s co-operation with ASIC may at first blush appear commendable, this co-operation only extended to admission of unlawful conduct constituting two of the eight offences with which she was charged and, in due course, convicted.

   d.The Applicant’s conduct only ceased when it was discovered. The Applicant did not, as it were, voluntarily re-tighten the scope of her moral compass so as to realise she was doing something wrong and based upon any such realisation, to try and rectify it. Plainly, she did not do so. It took an external investigator or regulator to detect her unlawful activity and bring her to account.

   e.The Applicant took advantage of an opportunity to carry out these offences precisely because of the level of trust and responsibility she thought came with her relationship with Westpac. She may have thought Westpac was “too big to notice” what she was doing. If so, this can only speak poorly of her character and judgment.

   f.The Applicant also betrayed the trust of her clients and one can only assume the clients knew the letters were false but were somehow convinced by the Applicant that all would be well.

   g.

   The fact that only five of the eight loans were disbursed does not mitigate against any finding of bad character. The Applicant’s propounding of this fact at the hearing in an attempt to minimise the seriousness of the matter, only serves to confirm her lack of judgement and lack of comprehension of the nature of her conduct, designed as it was, to induce the release of about

   
   

   $2.7 million from Westpac.[31]

   Accordingly, I think the Respondent’s contention is correct. I cannot be confident that if the Applicant were allowed back into the financial services industry and found herself in a position of trust, that she would not, again resort to acts of fraud and dishonesty to meet her desired objective.

[31] Plus almost $7,000 for herself in commissions, plus likely trailing commissions for the life of each of those duly completed loans.

1. Having regard to the preceding comments, I find there is reason to believe the Applicant is not of good fame and character, pursuant to s 920A(1)(d) of the Corporations Act. This, in turn, invokes the provisions of s 920B(2) of the Corporations Act.

   THE OPERATIVE EFFECT OF S 920B(2)(b) OF THE CORPORATIONS ACT

2. As mentioned above, the operative effect of s 920B of the Corporations Act means any finding that the Applicant is not of good fame and character will have serious and adverse consequences for any continued participation by her in the financial services industry.

3. Section 920B provides as follows:

   “What is a banning order?

   (1)  A banning order is a written order that prohibits a person from providing any financial services or specified financial services in specified circumstances or capacities.

   (2)  The order may prohibit the person against whom it is made from providing a financial service:

   (a)permanently; or

   (b)for a specified period, unless ASIC  has reason to believe that the person is not of good fame and character.

   …”

4. The scheme of s 920B(2) affords a decision-maker an alternate discretion to make a banning order (a) permanent or (b) for a specified period unless there is reason to believe that the person is not of good fame or character. [my underlining]  

1. In the event of a finding that a person is not of good fame or character, the discretionary alternative is denied to the decision-maker. In the circumstances of such a finding, the scheme of s 920B(2)(b) operates to re-direct a decision-maker back to

   
   

   s 920B(2)(a) and to compulsorily make the banning order permanent.

53.Accordingly, on the basis of my finding that this Applicant is not of good fame or character, a banning order under the Corporations Act must therefore be permanent.

LENGTH OF THE BANNING ORDERS

Credit Activities Ban

1. With respect to the Credit Act banning order, the Respondent referred me to “ASIC REGULATORY GUIDE 218 - Licensing: Administrative action against persons engaged in credit activities”. The relevant portion of Table 2 of that Regulatory Guide is reproduced below:[32]

   [32] Edited such that the bullet points in each column have been replaced with numbers.

   Table 2:  Factors and examples of conduct relating to specific periods of banning

OUTCOME	FACTORS	EXAMPLES OF CONDUCT (INDICATIVE ONLY)
Banning for 10+ years and permanent banning	1.     Dishonesty and intent to defraud 2.     Continued, knowing and wilful contraventions of the law and disregard of legal obligations 3.     Causing a large financial loss or making a large financial gain 4.     Previous contraventions of the law 5.     Serious incompetence and irresponsibility 6.     A likelihood that the person will engage in similar contravening conduct in the future 7.     Significant adverse impact on consumer confidence.	1.     Misappropriation of client funds or otherwise engaging in fraud or theft 2.     Falsification, concealment or deliberate destruction of records required to be kept 3.     Engaging in a pattern of persistent contraventions that indicates systemic failure or a general lack of understanding of and regard for compliance.

1. On any reasonable view, one is compelled to endorse the Respondent’s contention  that the Applicant’s dishonest and wilful conduct clearly falls within the first, second,  fifth and seventh bullet points of that Table under the heading “Factors”. The sixth bullet point is satisfied pursuant to my finding of a likelihood that the Applicant may very well engage in similar contravening conduct in the future. Likewise, the Applicant’s conduct clearly falls within the three bullet point items under the heading “Examples of Conduct” in the above Table. As such, the Applicant’s conduct, to my mind, obviously falls within the “Banning for 10+ years and permanent banning” category of that Table. 

2. This Applicant’s conduct meets the description of four out of seven factors plus all of the indicative examples of conduct in this category. I am therefore of the view that banning order in relation to this Applicant engaging in credit activity should be permanent.[33]

   [33] See Credit Act s 81(2)(a).

   Financial Services Ban

3. Even if I had not taken the view that the Applicant is not of good fame and character, I endorse the Respondent’s further contentions in support of the banning order being permanent.[34]  

   [34] See Exhibit 4, Respondent’s SFIC, p 13, [53].

4. With respect to the Corporations Act banning order, the Respondent referred me to Table 2 of “ASIC REGULATORY GUIDE 98 - Licensing: Administrative action against financial service providers”. The relevant portion of Table 2 of that Regulatory Guide is reproduced below:[35]

   [35] Edited such that the bullet points in each column have been replaced with numbers.

   Table 2: Factors and examples of conduct relating to specific periods of banning

OUTCOME	FACTORS	EXAMPLES OF CONDUCT (INDICATIVE ONLY)
Banning for 10+ years and permanent banning	1.     Dishonesty or intent to defraud 2.     Continued, knowing and wilful contraventions of the law, including market integrity rules and disregard of legal obligations 3.     Previous contraventions of the law 4.     Serious incompetence and irresponsibility 5.     A likelihood that the person will engage in contravening conduct in the future 6.     Significant adverse impact on  confidence in or the integrity of a  financial market 7.     Conduct significantly inconsistent with the orderly operation of a financial market 8.     Any dishonest conduct involving clients.	1.     Misappropriation of client funds or otherwise engaging in fraud or theft 2.     Falsification, concealment or deliberate destruction of records required to be kept 3.     Engaging in a pattern of persistent contraventions that indicates systemic failure or a general lack of understanding of and regard for compliance 4.     More substantial insider trading 5.     More substantial market manipulation or other significant misconduct in relation to a financial product traded on a financial market (eg s1041A- 1041E) 6.     Failure to apply client’s funds in accordance with the client’s instructions 7.     Forging a client’s signature 8.     Providing clients with false insurance documents.

1. Again,  it is very difficult to not be persuaded by the Respondent’s contention that this Applicant’s conduct clearly falls within the first, second, fifth, sixth and eighth bullet points under the heading “Factors”. The fifth bullet point is again satisfied pursuant to my finding that this Applicant may very well engage in similar contravening conduct in the future.  Likewise, the Applicant’s conduct clearly falls within the first, second, third and seventh bullet points under the heading “Examples of Conduct” of that Table. With specific reference to the seventh bullet point item, the Applicant’s conduct in this case was to, on her own admission, forge the signature of the employer in at least one of the fabricated letters. To my mind, this conduct is not at all distant from ‘forging a client’s signature’ as contemplated by this example. As such, the Applicant’s conduct, to my mind, obviously falls within the “Banning for 10+ years and permanent banning” category of that Table.

   60.This Applicant’s conduct meets the description of six out of eight factors in this category. For this reason, and for the additional reasons outlined above in relation to fraudulent conduct and my additional finding she is not of good fame and character, I am of the view the banning order should be permanent.[36]    

   [36] See Corporations Act s 920B(2)(a).

   ORDERS

2. I find that:

   a. ASIC’s decision to permanently ban the Applicant from providing financial services pursuant to ss 920A and 920B of the Corporations Act was the correct and preferable decision; and

   b. ASIC’s decision to permanently ban the Applicant from engaging in any credit activity pursuant to ss 80 and 81 of the Credit Act was the correct and preferable decision.

   DECISION

3. I affirm both of the decisions under review pursuant to s 43(1)(a) of the Administrative Appeals Tribunal Act 1975.

I certify that the preceding sixty-two (62) paragraphs are a true copy of the reasons for the decision herein of Senior Member T. Tavoularis

........................[sgd]............................

Associate

Dated: 1 June 2017

Date of hearing:	Monday, 8 May 2017
Applicant:	In person
Counsel for the Respondent:	Ms. K Slack
Solicitors for the Respondent:	ASIC Administrative Law Team