NGYUEN and AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
[2011] AATA 398
•9 June 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 398
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2011/1165
GENERAL ADMINISTRATIVE DIVISION )
Re DON NGUYEN
Applicant
AndAUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Respondent
DECISION
TribunalMs G Ettinger, Senior Member
Date9 June 2011
Place Sydney
DecisionPursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975, the Tribunal does not grant a stay. Pursuant to section 35 of the Administrative Appeals Tribunal Act 1975, the Tribunal does not grant a confidentiality order.
……..…[sgd]………………
Ms G Ettinger
Senior Member
CATCHWORDS
PRACTICE AND PROCEDURE –Financial Services provider – banning order – stay of implementation and non-publication and confidentiality orders sought – strength of case – banning orders to be public unless exceptional circumstances – need for informed market – no exceptional circumstances – stay not granted – confidentiality application not granted.
Corporations Act 2001 ss 945A, 946A, 946C, 1012A, 947D, 1041E, 1041F, 1041H, 920E, 922A
Administrative Appeals Tribunal Act 1975 ss 35, 41
Australian Securities and Investments Commission v PTLZ [2008] FCAFC 164
ASIC v AAT (2009) FCAFC 185
Re Howath v ASIC [2008] AATA 278
ASC v Kippe (1996) 20 ASCR 679
Australian Securities and Investments Commission v Administrative Appeals Tribunal (2009) 181 FCR 130
Repatriation Commission v Delkou (1985) 8 ALD 454
Australian Securities and Investments Commission [2008] AATA 106
REASONS FOR DECISION
9 June 2011
Ms G Ettinger, Senior Member
SUMMARY
1. Mr Don Nguyen, who holds a Diploma of Financial Planning worked providing financial services for the clients of Commonwealth Financial Planning Ltd (CFP) at the Commonwealth Bank for approximately 10 years, until July 2009. He is subject to a banning order made by the Australian Securities and Investments Commission (ASIC), on 3 March 2011.
2. ASIC’s delegate was satisfied that the applicant failed to comply with a number of financial services laws, and that there were 30 clients involved in the eight sections of the Corporations Act 2001 (Corporations Act) breached by Mr Nguyen.
3. Mr Nguyen applied for a stay of ASIC’s order pursuant to section 41 of the Administrative Appeals Tribunal Act 1975, (the AAT Act). Mr Nguyen also sought an order from the Tribunal pursuant to section 35 of the AAT Act, which would have the effect of precluding publication by ASIC of the existence of the banning order, and would further ensure that the hearing of the matter took place in private, and that his name and details not be published.
4. ASIC, the Respondent, in this matter opposes both.
5. I have taken into account the evidence and law in these areas, and do not grant the stay or the confidentiality orders sought by Mr Nguyen. My reasons follow.
THE ISSUES IN THIS CASE
6. The issues are whether the Tribunal should grant a stay, and/or make confidentiality orders in Mr Nguyen’s case.
THE LEGISLATION
7. The relevant legislation in this matter is section 41(2) of the AAT Act
8. Section 41(2) of the Administrative Appeals Tribunal Act 1975 (AAT Act) provides:
(2) The Tribunal may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the relevant proceeding), if the Tribunal is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal considers appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.
9. Section 35 of the AAT Act provides:
(2) Where the Tribunal is satisfied that it is desirable to do so by reason of the confidential nature of any evidence or matter or for any other reason, the Tribunal may, by order:
(a) direct that a hearing or part of a hearing shall take place in private and give directions as to the persons who may be present; and
(aa) give directions prohibiting or restricting the publication of the names and addresses of witnesses appearing before the Tribunal; and
(b) give directions prohibiting or restricting the publication of evidence given before the Tribunal, whether in public or in private, or of matters contained in documents lodged with the Tribunal or received in evidence by the Tribunal; and
(c) give directions prohibiting or restricting the disclosure to some or all of the parties to a proceeding of evidence given before the Tribunal, or of the contents of a document lodged with the Tribunal or received in evidence by the Tribunal, in relation to the proceeding.
APPLICANT’S SUBMISSIONS
10. Mr Nguyen argued for a stay of ASIC’s banning order, and that a confidentiality order be made so that his name and details not be published by ASIC or the Tribunal. He submitted that he should be granted a stay because he had left the CFP in July 2009, and has not worked in that field, or any other since that time. He told me that he was not seeking work because of his ill health, being stress, depression and anxiety which he has suffered for two years, and that he could not therefore be a threat to investors or to the general public. He also offered to enter into an agreement pursuant to which he would not give financial planning or investment advice anywhere in the world until a substantive decision had been made about him.
11. Mr Nguyen stated that ASIC’s decision had been made on the basis of unprofessional conduct and poor investigations. He submitted that ASIC obtained its information from a number of disgruntled clients who had a paper loss due to the Global Financial Crisis (GFC). Mr Nguyen gave details regarding a number of clients, including Mrs Snelling, Mrs Liu, Mrs Kulakowski, and Mr and Mrs Gescheit, and his views about the situation surrounding those former clients. He submitted that he had worked as a financial planner for 10 years, and that before the GFC, he had never had a complaint from a client.
12. Mr Nguyen also submitted that his details be suppressed as due to publicity in the press, he and his family had suffered since the banning order was made, and that the Financial Planning Association was seeking to terminate his membership.
RESPONDENT’S SUBMISSIONS
13. Mr Lo Surdo who represented ASIC at the hearing, submitted that a qualifying condition of the exercise of the power in section 41(2) of the AAT Act is that the Tribunal take into account the interests of any person who may be affected by the review (Australian Securities and Investments Commission v PTLZ [2008] FCAFC 164 at [41] per North and Downes JJ).
14. Mr Lo Surdo also submitted that in the decision of the Full Court of the Federal Court in ASIC v AAT (2009) FCAFC 185, the Court made several observations in relation to the need to consider the public interest when making a decision on a stay application under section 41(2). At paragraphs [51] to [57], Downes and Jagot JJ stated:
[51] The nature of the decision under review will affect the identification of the “interests of any persons who may be affected by the review”. Accordingly, those interests are to be identified by reference to the statutory scheme under which the decision under review was made. In the case of a banning order the provisions are those which ASIC identified in the Corporations Act and Corporations Regulations (and which are referred to above). It is apparent from those provisions that the person the subject of a banning order is only one of many people whose interests may be affected by the review. A banning order prohibits a person from providing financial services. Under s 766A(1) of the Corporations Act a person provides a financial service in a range of situations including when a person provides “financial product advice”, deals in a financial product, makes a market for a financial product, operates a registered scheme, provides a custodial or depository service or otherwise engages in conduct of a kind prescribed by the Corporations Regulations. Given the nature of a banning order, the persons who may be affected by a review of its making include not only the recipient and his or her dependants, associates and employees but also that person’s existing and potential clients, as well as the public at large.
[52] Determining whether the making of an order under s 41(2) of the AAT Act is desirable requires resolving these potentially competing interests. In this process of resolution the scheme embodied by the legislation under which the banning order is made is central. The context set by that scheme is a “fundamental element” in the formation of the opinion according to law (R v Hunt; Ex parte Sean Investments Pty Ltd (1979) 180 CLR 322 at 329). The scheme discloses that a banning order protects the public. It is intended to protect the public from obtaining financial services from a person who (amongst other things) has not, or ASIC reasonably believes has not, complied with a financial services law or has had their Australian financial services licence suspended or cancelled (s 920A(1)).
[53] The structure of the scheme also indicates Parliament’s assessment of the appropriate resolution of the competing interests of persons who may be affected by a banning order. Other than in limited circumstances a banning order cannot be made without giving the proposed recipient a right to be heard and to make submissions in private to ASIC (s 920A(2)). A banning order must be accompanied by a statement of reasons (s 920F(1)). If, and only if, ASIC makes a banning order is it required to make public that fact (ss 920E(2) and 922A). For the AAT to form an opinion under s 41(2) of the AAT Act (that it would be desirable and in the “interests of any persons who may be affected by the review” to make an order staying or otherwise affecting the operation or implementation of ASIC’s decision) these elements of the statutory regime, and the balance between the competing interests that they represent, must be treated as a fundamental element in the weighing of the competing considerations.
[54] Moreover, information is the key to effective trading in any market. It takes the place of regulation in ensuring fairness. A market which is not fully informed is not operating properly. Is not an investor who is about to deposit funds with a person providing financial services entitled to know that a banning order has been made against the person? If the order has been stayed on substantial grounds the person is also entitled to know that. The informed investor may continue with the proposal. If the investor does not, then that is just an example of the operation of the market place. The critical matter is that the market is fully informed. If the banning order is not disclosed, but subsequently upheld, is not the investor entitled to complain that all the circumstances should have been made public?
[55] The power of the AAT to make an order effectively staying the banning order itself is not in doubt. That seems to us to be the primary interlocutory remedy a person banned might seek. Once that order is granted the need for secrecy by the imposition of a further stay of publication will not usually arise. The occasion for such a further order will be rare. At the least, consideration of such a further order should be separate from consideration of the stay of the banning order itself (see Australian Securities and Investments Commission v PTLZ (2008) 48 AAR 559 ;[2008] FCAFC 164 at [52]). The appropriateness of a stay of publication will be significantly affected by the granting of a stay of the banning order itself.
[56] In the present matter the AAT’s reasons for the making of orders under ss 41(2) and 35(2) of the AAT Act do not disclose consideration of these critical elements of the Corporations Act. The AAT’s reasons appear to proceed on an unfounded assumption that the scheme established by the Corporations Act is either neutral in, or mere background to, the formation of the required opinion of desirability. We do not accept that assumption. Although the reasons briefly address the public interest in [28]–[29], they do not appear to grapple with the context set by the Corporations Act or the importance of the availability of information to the market generally and to existing and potential customers of the second respondent, as a critical element in the public interest.
[57] As noted, it is true that s 41 will require consideration of the situation of dependents, associates and employees of the banned person. Employees may lose their employment if knowledge of the ban affects the person’s business. However unfortunate this may be, we think it is of lesser significance than the matters to which we have referred.
15. The public interest in this case, Mr Lo Surdo submitted, includes protecting the integrity of the financial services market, maintaining confidence in the financial services industry and providing a potential deterrent upon others in the relevant industry (Re Howath v ASIC [2008] AATA 278 at [147]). These matters related variously to the public generally, other market participants, and current and prospective clients of the Applicant.
16. He submitted that the consequence of a stay of the operation of the banning order would be that the Applicant would be permitted to provide financial services in circumstances where his conduct had been found by ASIC to amount to serious breaches of the Corporations Act. That included a finding he submitted, that Mr Nguyen’s conduct was misleading and deceptive, and that he would not comply with financial services laws in the future. Mr Lo Surdo submitted that the conduct complained of was not isolated, but significant and extensive.
17. The banning order concerned conduct Mr Lo Surdo submitted, that amounted to a number of serious breaches of the Corporations Act, including contraventions of sections 945A, 946A, 946C, 1012A , 947D, 1041E, 1041F and 1041H of the Corporations Act. In Mr Lo Surdo’s written submissions, he provided detailed information regarding certain former clients of Mr Nguyen, also mentioned by Mr Nguyen in his oral submissions.
18. Mr Lo Surdo submitted that there is a significant public interest in the banning order which outweighs the consequences for the Applicant if a stay were not granted. He submitted that the factors that the Tribunal should take into account in considering whether to make an order under section 41(2) included:
(a)the prospects of success of the application for review;
(b)the consequences for ASIC in carrying out its functions under the Corporations Act 2001 and for those whose interests may be affected by the review;
(c)the consequences for the Applicant if the stay were, or were not, granted;
(d)any conditions that could be imposed and which would ameliorate any consequences of either granting or refusing a stay.
THE TRIBUNAL’S CONSIDERATION AND CONCLUSIONS
19. I am mindful that the purpose of a banning order is not to punish the subject of the order but to protect the public. As the Full Federal Court in ASC v Kippe (1996) 20 ASCR 679 at 687 said:
The immediate and direct legal effect intended by a banning order is not to impose a penalty or punishment on the person concerned but to be preventative in that it removes a perceived threat to the public interest and to the public confidence in the securities and futures industry by removing that person from participation therein.
20. Downes and Jagot JJ in ASIC v AAT at [53] stated as follows:
53. The structure of the scheme also indicates Parliament’s assessment of the appropriate resolution of the competing interests of persons who may be affected by a banning order. Other than in limited circumstances a banning order cannot be made without giving the proposed recipient a right to be heard and to make submissions in private to ASIC (s 920A(2)). A banning order must be accompanied by a statement of reasons (s 920F(1)). If, and only if, ASIC makes a banning order is it required to make public that fact (ss 920E(2) and 922A). For the AAT to form an opinion under s 41(2) of the AAT Act (that it would be desirable and in the “interests of any persons who may be affected by the review” to make an order staying or otherwise affecting the operation or implementation of ASIC’s decision) these elements of the statutory regime, and the balance between the competing interests that they represent, must be treated as a fundamental element in the weighing of the competing considerations.
21. In considering whether to grant a stay, I shall take into account long established indicia, articulated in cases such as Repatriation Commission v Delkou (1985) 8 ALD 454 and Re VLDP and Australian Securities and Investments Commission [2008] AATA 106 at [5].
22. In considering the prospects of success of Mr Nguyen’s application, I take into account his detailed 50 page document dated 16 December 2010, in which he gives his reply to ASIC’s concerns. I also take into account ASIC’s findings as made in the reviewable decision.
23. Mr Nguyen attributes certain of the troubles he has faced to the GFC. He also says his files with regard to Aconomos and other clients were audited by CFP, and no concerns were raised regarding Statements of Advice or other documentation. He says he gave no guarantees of profit to his clients, and made it clear investment and growth is not guaranteed, and that negative returns are possible. He alleges that certain of the clients misrepresented their financial positions to the authorities.
24. Whilst I am not in a position to make a finding regarding the outcome of the case, and am not in these circumstances required to, I am satisfied that Mr Nguyen’s activities in the financial planning field are more than likely to have breached at least a number of the sections of the Corporations Act which ASIC has found he has breached. If indeed, as appears, he gave inappropriate advice in regard to the Aconomos Investment, did not document the personal circumstances of Mrs Kulakowski (aged 85 years), neglected to provide Statements of Advice (SOA), to certain clients, neglected to provide written disclosure of remuneration and charges to certain clients, and neglected to provide Product Disclosure Statements (PDS), then ASIC’s decision to ban Mr Nguyen is likely to be affirmed by the Tribunal.
25. ASIC’s delegate was satisfied that the Applicant failed to comply with a number of financial services laws, specifically the following sections of the Corporations Act :
·s 945A(1) of the Corporations Act
·s 946A(1) of the Corporations Act
·s 946C of the Corporations Act
·s 1012A(3) of the Corporations Act
·s 947D of the Corporations Act
·s 1041E of the Corporations Act
·s 1041F of the Corporations Act
·s 1041H of the Corporations Act.
26. Moving then to the public interest; ASIC by making a banning order against Mr Nguyen, ensures the protection of the integrity of the financial services market, adds to maintaining of confidence in the financial services industry, and provides a potential deterrent upon others in the relevant industry (Re Howath v ASIC [2008] AATA 278 at [147]).
27. If a stay were granted, Mr Nguyen would be permitted to provide financial services in circumstances where his conduct has been found by a delegate of ASIC, to amount to serious breaches of the Corporations Act. I accept the submissions of the Respondent that in this case there is a significant public interest in the banning order which outweighs the consequences for the Applicant if a stay were not granted. In preferring the submissions of the Respondent, I acknowledge Mr Nguyen’s submissions that he is in ill health, and not seeking work in the financial services sector or elsewhere at present.
28. I must take into account the effect on the Applicant of the stay being granted or refused. I have already stated that if a stay were to be granted, Mr Nguyen would be permitted to provide financial services in circumstances where his conduct has been found to amount to serious breaches of the Corporations Act. As noted above, he has told me that he is in ill health and not seeking work. That no doubt has financial and other consequences for him, which do not impact on whether a stay is granted. Accordingly those personal circumstances mitigate against a stay being granted.
29. I have noted Mr Nugyen’s offer to give an undertaking to enter into an agreement where he would not give financial planning or investment advice anywhere in the world until a substantive decision had been made about the banning order. I find such offer of an undertaking in contradiction of Mr Nguyen’s statements that he is not seeking work, and find it inappropriate in the circumstances that he enter into any such offer.
30. I move then to consider Mr Nguyen’s request for confidentiality and non-publication of his banning order by ASIC. I am mindful that pursuant to section 920E(2) of the Corporations Act, ASIC must publish a notice in the Gazette as soon as practicable after making a banning order. Pursuant to section 922A, ASIC maintains a register relating to financial services licensees and authorised representatives of financial services licensees, and whether they are subject to a banning order or disqualification.
31. I have noted Mr Nguyen’s submissions that he and his family have suffered because of the publicity surrounding his banning order. I can understand that. However that must be weighed against the public interest. The making of confidentiality orders under section 35 of the AAT Act, were the subject of consideration by the Full Federal Court in ASIC v AAT.
54. Moreover, information is the key to effective trading in any market. It takes the place of regulation in ensuring fairness. A market which is not fully informed is not operating properly. Is not an investor who is about to deposit funds with a person providing financial services entitled to know that a banning order has been made against the person? If the order has been stayed on substantial grounds the person is also entitled to know that. The informed investor may continue with the proposal. If the investor does not, then that is just an example of the operation of the market place. The critical matter is that the market is fully informed. If the banning order is not disclosed, but subsequently upheld, is not the investor entitled to complain that all the circumstances should have been made public?
32. When the Full Court turned to section 35, the Judges said at [75] and [76]:
75. Suppression orders are rarely made in courts, even though publicity undoubtedly disadvantages the parties. Criminal proceedings are a good example. In the AAT itself facts which parties would not wish to be published and which may disadvantage them are frequently published. Social security applications are a good example. The reason these matters are not kept secret is the overriding importance of justice being administered openly and in public. It is not readily apparent why persons in businesses should be treated differently even when, for example, employees may be disadvantaged.
76. When measured against the existence of the norm of a public hearing and the scheme established by the Corporations Act with respect to banning orders, it is apparent that the AAT would need some cogent reason by reference to the particular case to depart from the ordinary requirement of a public hearing. It is difficult to accept that harm (even serious harm) to the recipient’s reputation resulting from public awareness of the banning order will be a sufficiently cogent reason to justify the grant of a stay in most cases. This is because the risk of harm of this type is inherent in the nature of a banning order.
33. Accordingly it is clearly of great importance that the competing interests of the Applicant and the public must be weighed up in cases such as the present where the right of persons operating in a market arises, to be fully informed about the circumstances in which they are trading.
34. Accordingly, there is nothing I have heard which convinces me that Mr Nguyen’s name or identity should be suppressed, or that ASIC should not publish his name on its website or elsewhere as appropriate.
35. I decline to grant a stay of the ASIC banning order, and decline Mr Nguyen’s application relating to confidentiality.
DECISION
36. Pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975, the Tribunal does not grant a stay. Pursuant to section 35 of the Administrative Appeals Tribunal Act 1975, the Tribunal does not grant a confidentiality order.
I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member
Signed: .............[sgd]........................................................
Casey Comans AssociateDate of Hearing: 6 May 2011
Date of Decision: 9 June 2011
Applicant: Self represented
Counsel for the Respondent: Mr A Lo Surdo
Solicitor for the Respondent: Ms A Rees, ASIC
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