Sweeney and Australian Securities & Investments Commission - [2024] AATA 872

Sweeney and Australian Securities & Investments Commission [2024] AATA 872 (26 April 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2022/10374
Re:Sean Sweeney
APPLICANT

AndAustralian Securities and Investments Commission
RESPONDENT

DECISION
Tribunal:Deputy President Bernard J McCabe
Date:26 April 2024
Place:Sydney

1.The reviewable decision is affirmed.
2.Being satisfied it is appropriate to do so, the Tribunal orders under s 35(4) of the Administrative Appeals Tribunal Act 1975 that:
(a) the contents of Annexure A to these reasons be redacted when these reasons are published to the public and
(b) any version of the reasons containing an unredacted copy of Annexure A should not be published to any person (apart from the Tribunal and the parties and their legal representatives) except in connection with any appeal from this decision or otherwise as required by law.

.................................[SGD].......................................
Deputy President Bernard J McCabe
Catchwords
CORPORATIONS — Banning order – Dishonest conduct – Whether the applicant is a fit and proper person — Historical offending —— The purpose of banning orders —— Decision affirmed.
Legislation
Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth)
Crimes Act 1900 (NSW)
Cases
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321
Hughes and Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127
Masu Financial Management Pty Ltd and Australian Securities and Investments Commission [2017] AATA 97
Tarrant and Australian Securities and Investments Commission [2013] AATA 926
REASONS FOR DECISION
Deputy President Bernard J McCabe
26 April 2024

Sean Sweeney was an insurance broker with a gambling problem. Over a six-month period in 2018, he gambled away over $400,000 that had been paid to him in respect of his clients’ insurance premiums. The unsophisticated fraud was soon discovered. He pleaded guilty to eight counts of fraud under s 192E of the Crimes Act 1900 (NSW) in 2022. The Australian Securities and Investments Commission (ASIC) thereafter commenced regulatory action against him. A delegate decided to impose a permanent ban on Mr Sweeney under ss 920A and 920B of the Corporations Act 2001 (Cth). The ban prevents Mr Sweeney from providing or being involved in the provision of financial services (including the provision of insurance products).
Mr Sweeney has asked the Tribunal to review the delegate’s decision. Mr Sweeney accepts the delegate’s discretion to impose the ban was properly enlivened. Indeed, his counsel at the hearing before me, Mr Allen, conceded the delegate’s decision was reasonable at the time it was made given the information before the delegate. But Mr Sweeney says additional information – including information about what has happened since the delegate’s decision - would justify the Tribunal varying the original decision to limit the duration and scope of the banning order.
I am not satisfied it is appropriate to vary the delegate’s decision. The term and scope of the banning order should stand. I explain my reasons below.
What happened?
There is no real dispute about the facts of this case.
Mr Sweeney has made his career in the financial services industry. He has been employed over a long period as an insurance broker. He is appropriately credentialed. By all accounts, he enjoyed a good reputation in the industry. He has no prior criminal history nor am I aware of any regulatory action against him in connection with his work before the events of 2018.
Mr Sweeney has furnished letters of reference from participants in the industry including Mr John O’Brien of Kobe Insurance Services Pty Ltd. The referees say Mr Sweeney’s offending was out of character. Mr O’Brien’s letter says Mr Sweeney should be given a second chance. Mr O’Brien goes so far as to say his firm would be prepared to employ Mr Sweeney if the ban were relaxed. Mr Sweeney reported offers to similar effect from at least three other firms: exhibit 3 at [6]-[8]. The magistrate who sentenced Mr Sweeney also noted the positive character references provided by the applicant in the course of sentencing remarks, although it is not clear the magistrate gave them much weight.
The sentencing assessment report provided to the Local Court (exhibit 6) in connection with the resolution of charges notes Mr Sweeney “has a long-term history of drug and alcohol use”. The report adds:
It appears that when Mr Sweeney is using drugs and alcohol, he is at an increased risk of engaging in impulsive behaviours including problematic gambling.
The report also refers to a psychologist’s opinion that Mr Sweeney suffered from a severe Gambling Disorder that required treatment. A copy of the report dated 22 April 2022 was tendered in these proceedings (exhibit 7). The report delves into Mr Sweeney’s history, including his history of drug and alcohol use. The report suggests he had a serious substance abuse problem over a long period. I understand Mr Sweeney’s drug of choice was cocaine, which means he inevitably engaged in unlawful behaviour when he obtained those drugs. The psychologist assumed the offending which gave rise to the charges occurred to finance the applicant’s gambling. I will return to that opinion below.
In his induced statement (exhibit 4) that was provided to police, Mr Sweeney traced his downfall back to a relationship he formed with another individual in 2015. I do not need to rehearse the details disclosed in the statement beyond noting the applicant was introduced to the concept of ‘premium funding’.
The premium funding process was explained in the various documents. A specialist financier would provide an advance that covered the annual cost of a client’s insurance premiums. The client would pay back the financier in instalments at a lower interest rate than was available through a bank. That option was attractive to small businesses that wanted to retain cash flow. The Australian Financial Services Licence (‘AFSL’) holder for whom Mr Sweeney worked apparently had established relationships with several premium funders but Mr Sweeney struck up his own relationship with another provider of premium funding.
The charges preferred against Mr Sweeney arose out of his dealings with the premium funder. The relevant facts are summarised in ASIC’s statement of facts, issues and contentions. Mr Allen acknowledged ASIC’s summary of the charges was accurate. The summary begins at [43] which says:
Each of the offences involved the Applicant arranging insurance premium funding for clients in a way in which he received funds for his own use. The offending occurred over the period of February 2018 to August 2018 and involved eight separate client accounts. The total loss to the insurance premium funder across the eight offences was $414,655.
It turns out Mr Sweeney arranged with the premium funder to deposit the advances it was making to pay Mr Sweeney’s clients’ premiums into Mr Sweeney’s own account instead of the AFSL holder’s trust account. Mr Sweeney was able to use the deposited funds as his own. It was not a sophisticated fraud, and it was detected relatively easily.
ASIC points out (at [49]) the funder was the ultimate victim of the fraud: it is still awaiting repayment of monies it advanced. The specific facts which gave rise to the eight charges are summarised at [53]. The summary is reproduced in annexure A to these reasons.[1]
[1] The remarks of the sentencing magistrate were the subject of orders under s 35 of the Administrative Appeals Tribunal Act 1975 (the AAT Act). Those orders were made prior to the hearing by another member and there were no submissions before me suggesting the circumstances which led to those orders had changed. To ensure those orders are not inadvertently undermined, it is therefore appropriate to make an order under s 35(4) of the AAT Act directing that (a) the contents of Annexure A be redacted from these reasons when these reasons are published to the public and (b) any version of the reasons containing an unredacted copy of Annexure A should not be published to any person (apart from the Tribunal and the parties and their legal representatives) except in connection with any appeal from this decision or otherwise as required by law.
The applicant pleaded guilty to the offences at an early opportunity and cooperated with police.
The sentencing magistrate’s remarks at the hearing are relatively brief. They are recorded in a transcript which is the subject of a confidentiality order. Suffice to say there was some dispute at the hearing before me over the magistrate’s assessment of the seriousness of the offending. The remarks recorded in the transcript suggest the offending is not at the lowest end, but somewhere towards the middle of the range in terms of seriousness. Given the substantial amount of money involved and the fact the offending occurred over several months – the applicant repeated the same unsophisticated fraud several times – it is clear to me that the offending was serious. His Honour noted the sentencing assessment report identified the applicant as being at relatively low risk of reoffending, although it is not clear how much weight he gave that recommendation. At the end of the process, the applicant was sentenced to gaol terms on all the charges, but the applicant was allowed to serve those sentences in the community by completing supervised community service. Mr Sweeny has since complied with his community service obligations.
Mr Sweeney’s statements in these proceedings explain he has taken steps to address the gambling addiction and the substance abuse issues. He says those are the root causes of his offending. The psychologist report tendered to the court in 2022 (exhibit 7) confirms the applicant was attending therapy for gambling and that he was abstaining from drugs and alcohol. His statements in these proceedings say he continues down that path of treatment and abstinence: see, for example, exhibit one at [9]-[10] and exhibit three at [4]-[5]. While that is encouraging, it is clear the risk of relapse can never be entirely eliminated.
At the hearing, I was told the applicant had already repaid around $100,000 of the $414,655 he was ordered to pay as restitution. He has sought time to pay the balance of the money he owes. He pointed out in exhibit one at [13] – [16] that permitting him to return to the business of insurance would increase his ability to earn an income. That would enable him to repay the monies he stole more quickly. He pointed out insurance is the area of work he knows best, and his credentials all relate to the industry.
The reviewable decision
The delegate made the banning decision under s 920B of the Corporations Act after being satisfied two of the grounds mentioned in s 920A(1) were made out. The delegate referred in particular to:
·the fraud convictions (although I note the delegate erroneously assumed Mr Sweeney was convicted on 16 counts of fraud, not eight) which satisfied the criteria in s 920A(1)(c); and
·section 920A(1)(d) which enlivens the cancellation power if the decision-maker has reason to believe the applicant is not a fit and proper person to discharge the enumerated functions.
There was no hearing before the delegate. A hearing was not required given the fraud convictions.
As I have already explained, there is no doubt the delegate’s discretion to cancel under ss 920A and 920B was enlivened given the fraud convictions. There was some argument from the applicant over whether it would still be open to me to find there was reason to believe he was not a fit and proper person given what has transpired since the reviewable decision.
Exercising the discretion on review
The parties acknowledged the exercise of the discretion to ban or suspend in s 920A is informed by the objectives of chapter 7 of the Corporations Act. Those objectives are set out in s 760A as follows:
The main object of this Chapter is to promote:
(a)  confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and
(aa)  the provision of suitable financial products to consumers of financial products; and
(b)  fairness, honesty and professionalism by those who providefinancial services; and
(c)  fair, orderly and transparent markets for financial products; and
(d)  the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.
When I step into ASIC’s shoes to make a decision, I am also required to keep in mind ASIC’s statutory mission. The objectives and guidance are set out in s 1 of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act). After identifying the objectives, s 1(2) says ASIC must strive to (amongst other things):
(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;…
These provisions are obviously important. They make clear that the regulatory regime is concerned with consumer protection, but they are also focused on making sure markets operate efficiently. While the interests and circumstances of the applicant must also be taken into account (see, generally, Tarrant and Australian Securities and Investments Commission [2013] AATA 926 at [387]), the public interest in consumer protection and efficient markets is of particular importance.
I should pause to deal with the outstanding question over whether there is reason to believe the applicant is a ‘fit and proper person’. The expression ‘fit and proper person’ is a well-known statutory formulation that is used in a variety of contexts. The classic explanation of the concept is found in Hughes and Vale Pty Ltd v New South Wales (No 2) (1955) 93 CLR 127 where Dixon CJ, Mctiernan and Webb JJ said (at 156-157) fitness “with respect to an office is said to involve three things: honesty knowledge and ability…”. But the High Court also pointed out in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 that the expression must always be understood in the particular context in which it was used and having regard to “the activities in which the person is or will be engaged and the ends to be served by those activities.”: at 380 per Toohey and Gaudron JJ.
The statutory context in this case includes s 913BB. That section says there are certain matters to which ASIC must have regard when considering whether the applicant is unable to satisfy the fit and proper person requirement in s 920A(1)(d). One of the matters that must be taken into account is “whether, in the last 10 years, the person has been convicted of an offence”. ASIC is also permitted to have regard to any other matter that it considers relevant.
Mr Allen argued on Mr Sweeney’s behalf that there must be some doubt as to whether I could find in all the circumstances that ASIC still has reason to believe Mr Sweeney is not a ‘fit and proper person’ to undertake the regulated activities he undertook, or that he might be permitted to undertake if the scope of the banning order were narrowed. I accept there is no reason to doubt he has the knowledge and ability to undertake the work given he has a track record in the industry. But what of his honesty? The requirement to have regard to Mr Sweeney’s offences underlines the importance of the question.
While acknowledging Mr Sweeney:
·appears to have made progress in his treatment and is (I am told) abstaining from gambling and substance abuse;
·appears to have developed insight into his offending and is genuinely contrite for what occurred so that he is unlikely to offend again; and
·continues to make good faith efforts towards restitution;
the offences remain an insuperable obstacle. The behaviour that was the subject of the charges was serious if unsophisticated: large amounts were involved. The applicant’s behaviour was driven by addiction, but those addictions might resurface if the applicant were to slacken his commitment to sobriety. The frauds were not a victimless crime. The applicant was in a position of trust when the frauds occurred and he wants to return to a position of trust, even if he might have a more limited role were I to narrow the scope of the banning orders. The offending all happened comparatively recently. In all the circumstances, I am satisfied the nature and timing of the convictions are such that I have reason to believe the applicant is not a fit and proper person to undertake the regulated activity.
That brings me to the exercise of the discretion. I have already noted the discretion is informed by the objectives of the regulatory regime. I also acknowledge the purpose of regulatory action is largely protective, rather than punitive, as the Tribunal pointed out in Tarrant. The protective function is also recognised in the Regulatory Guide published by ASIC, RG98 ‘ASICS’s powers to suspend, cancel and vary AFS licences and make banning orders’. I say ‘largely protective’ because consumer protection is not the only public interest which the regulatory scheme seeks to promote. As I have already explained, that regime is also concerned to promote efficient markets. RG98 makes clear that it is relevant and important to consider the potential of the regulatory action to reinforce “the integrity and reputation of the financial services industry”: see Table 2, RG98.
RG98 and cases like Tarrant suggest it is appropriate for me to weigh up the seriousness of the conduct that occurred and the risk that further misbehaviour may yet occur. Conduct which involves dishonesty and loss to individuals is obviously of particular concern. I must also have regard to the role of regulatory action in deterring that individual from engaging in further behaviour, and the potential for general deterrence of others. As I explained in Masu Financial Management Pty Ltd and Australian Securities and Investments Commission [2017] AATA 97 at [48], a cancellation or disqualification power like the one contained in s 920A:
... is (amongst other things) a tool for exhortation and correction that the regulator can use as each licensee engages with the never-ending task of adapting and improving its individual arrangements to meet the challenges it faces. The sting of the lash contained in s 915C [of the Corporations Act 2001] can help focus the mind of compliance laggards; the report of the lash will also serve an example pour encourager les autres.
Of course, a banning order does not really have a deterrent effect on the individual, at least for the life of the banning order. A permanent banning order would only be valuable for purposes of general deterrence.
I acknowledge the applicant is experiencing a measure of financial hardship after being excluded from the industry where he has spent most of his working life. At least in the short term, he is likely to experience a reduced earning capacity if he is unable to return to that work. He is a single man of working age with financial commitments who will be forced to requalify if he is unable to work in the industry.
The applicant has likely learned his lesson following the criminal convictions. Some sort of regulatory action would underline that lesson. But while a ban of a shorter duration than a permanent ban might offer specific deterrence, a longer ban might be an effective way of communicating a lesson to other participants in the industry.
RG98 includes examples of conduct that might prompt a longer ban. Misappropriation of clients’ funds or engaging in fraud or theft would tend to suggest a longer ban of 10-12 years or a permanent ban is appropriate – although RG98 emphasises the importance of looking at the circumstances of each particular case.

In this case, I am satisfied a permanent ban is appropriate having regard to the fact the fraud was blatant and relatively serious, and because it occurred in the course of undertaking the very work the applicant would like to be able to resume. The conduct in question also occurred comparatively recently. Imposing a permanent ban would help communicate a message to other participants in the industry that dishonest conduct of this nature will not be accepted. The ban performs a protective function. The message will also reassure consumers of financial services that fraud and dishonest conduct is policed and punished. That promotes the development of a high-trust commercial environment. A high-trust commercial environment is more efficient because it reduces transaction costs when consumers do not need to guard against this sort of bad behaviour.
I acknowledge the applicant is making efforts to address the root causes of his bad behaviour. His genuine expression of contrition is welcome. However, the other considerations I have discussed outweigh those factors.
I did consider the possibility of imposing a long term or permanent ban on Mr Sweeney but narrow its scope so that he could work in the industry as a supervised employee in the short or medium term. I have decided that is not the correct course. The message to other industry participants would be diluted if I were to reduce the scope of the ban. A clear message is needed to achieve a deterrent effect. It is also desirable to send a clear, unmistakable message to consumers that fraud is not tolerated anywhere in the industry.
Mr Sweeney will undoubtedly be disappointed by this decision given the attempts he has made to reform and redress and given his cooperation with police. I acknowledge my decision will compound the hardship he has already experienced. But I am satisfied affirming the reviewable decision is justified and proportionate given the magnitude of what he did in 2018, the need for deterrence and the need to promote efficiency and confident and informed participation in the markets.
Conclusion
The reviewable decision is affirmed.

I certify that the preceding 38 (thirty-eight) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

..................................[SGD]......................................
Associate
Dated: 26 April 2024

Date(s) of hearing: 27 March 2024

Counsel for the Applicant: Mr Damien Allen

Solicitors for the Applicant: Kekatos Lawyers

Counsel for the Respondent: Mr Anna Garsia

Solicitors for the Respondent: Australian Securities and Investments Commission

EXHIBIT

DESCRIPTION OF EVIDENCE

PARTY

DATE OF DOCUMENT

DATE RECEIVED

1 Affidavit of Sean Sweeney A 11 July 2023 14 July 2023

2 Affidavit of Sean Sweeney A 13 September 2023 13 September 2023

3 Affidavit of Sean Sweeney A 27 March 2024 27 March 2024

4 Affidavit of Brian Carson Wilson A 1 November 2023 2 November 2023

5 The induced statement of Mr Sweeney A 22 April 2022 20 June 2023

6 Sentencing Assessment Report A 5 July 2023 5 July 2023

7 Mind Ways Psychological Services Report A 19 August 2022 20 June 2023

Date(s) of hearing:	27 March 2024
Counsel for the Applicant:	Mr Damien Allen
Solicitors for the Applicant:	Kekatos Lawyers
Counsel for the Respondent:	Mr Anna Garsia
Solicitors for the Respondent:	Australian Securities and Investments Commission

EXHIBIT	DESCRIPTION OF EVIDENCE	PARTY	DATE OF DOCUMENT	DATE RECEIVED
1	Affidavit of Sean Sweeney	A	11 July 2023	14 July 2023
2	Affidavit of Sean Sweeney	A	13 September 2023	13 September 2023
3	Affidavit of Sean Sweeney	A	27 March 2024	27 March 2024
4	Affidavit of Brian Carson Wilson	A	1 November 2023	2 November 2023
5	The induced statement of Mr Sweeney	A	22 April 2022	20 June 2023
6	Sentencing Assessment Report	A	5 July 2023	5 July 2023
7	Mind Ways Psychological Services Report	A	19 August 2022	20 June 2023