Wynd and Australian Securities and Investments Commission - [2020] AATA 3387

Wynd and Australian Securities and Investments Commission [2020] AATA 3387 (4 September 2020)
Division:TAXATION AND COMMERCIAL DIVISION
File Number: 2019/5017
Re:Anthony David Wynd
APPLICANT

AndAustralian Securities and Investments Commission
RESPONDENT

DECISION
Tribunal:F D O'Loughlin QC, Deputy President
Professor A O'Connell, Senior Member
Date:4 September 2020
Place:Melbourne

The Tribunal sets aside the decision under review and in lieu thereof orders that the Applicant be prohibited under the National Consumer Credit Protection Act 2009 (NCCP Act) from performing any function involved in the engaging in of credit activities permanently, other than as an employee of an APRA-authorised Approved Deposit-taking Institution, assisting borrowers obtain loans independently of any financial services.
...................[sgd].....................................................
F D O'Loughlin QC, Deputy President and Professor A O’Connell, Senior Member
Catchwords
CONSUMER CREDIT – banning orders under the National Consumer Credit Protection Act 2009 – contravention of the NCCP Act – being involved in a contravention – fit and proper person test – general obligations of licensees – efficiently, honestly and fairly – credit legislation – maximum personal interest rate under the National Credit Code – relevance of banning order under the Corporations Act 2001 – scope and term of banning order
Legislation
Australian Securities and Investment Commission Act 2001 (Cth).
Corporations Act 2001 (Cth).
Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures)) Act 2020 (Cth).
National Consumer Credit Protection Act 2009 (Cth).
The National Credit Code (Schedule 1 to the NCCP Act).
Cases
Australian Securities and Investments Commissions v Camelot Derivatives Pty Limited (in liquidation) [2012] FCA 414.
Australian Securities and Investments Commission v Financial Circle Pty Ltd [2018] FCA 2.
Australian Securities and Investments Commission v Financial Circle Pty Ltd (No 2) [2018] FCA 1644.
Australian Securities and Investments Commission v Kippe [1996] FCA 517.
Australian Securities and Investments Commission v Wealth and Risk Management Pty Ltd [2017] FCA 477.
Australian Securities and Investments Commission v Wealth and Risk Management Pty Ltd (No 2) [2018] FCA 59.
HZCP v Minister for Immigration & Border Protection [2018] FCA 1803.
Yorke v Lucas (1985) 158 CLR 661.
Young Investments Group Pty Ltd v Mann (2012) 293 ALR 537.
Secondary Materials
Explanatory Memorandum to the National Consumer Credit Protection Bill 2009 (Cth).
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry conducted by the Honourable Kenneth Madison Hayne AC QC.
Australian Securities and Investments Commission Regulatory Guide RG 105: Australian Financial Services Licence: Organisational Competence.
Australian Securities and Investments Commission Regulatory Guide RG 206: Credit Licensing: Competence and Training.
Australian Securities and Investments Commission Regulatory Guide RG 218: Licensing: Administrative action against persons engaging in credit activities.
REASONS FOR DECISION
F D O'Loughlin QC, Deputy President
Professor A O'Connell, Senior Member
4 September 2020

Being the subject of orders made pursuant to s 80 of the NCCP Act,[1] and ss 920A and 920B of the Corporations Act[2] that permanently prohibit him from engaging in, respectively, any credit activities and any financial services activities, the Applicant seeks review of the Credit Banning Order[3] and has abandoned the challenge to the Financial Services Banning Order.[4]
[1]National Consumer Credit Protection Act 2009 (Cth).
[2]Corporations Act 2001 (Cth).
[3]The banning order made pursuant to s 80 of the NCCP Act that the Applicant challenges.
[4]The banning order made pursuant to ss 920A and 920B of the Corporations Act that permanently prohibits the Applicant from engaging in any financial services activities.
Both banning orders were made on the same day and have their origins in the Applicant’s roles as an employee of WRM[5] and as an employee and director of Financial Circle,[6] four Federal Court of Australia decisions, namely the WRM Injunction Decision,[7] the WRM Decision,[8] the Financial Circle Injunction Decision,[9] and the Financial Circle Decision[10] concerning first WRM’s and then Financial Circle’s business activities, and the Applicant’s involvement in those business activities. The Federal Court was highly critical of both WRM’s and Financial Circle’s business operations and in each case imposed sanctions. The Applicant was for a short period an employee of WRM and was an employee and the sole director of Financial Circle.
[5]Wealth and Risk Management Pty Ltd.
[6]Financial Circle Pty Ltd.
[7]Australian Securities and Investments Commission v Wealth and Risk Management Pty Ltd [2017] FCA 477 Moshinsky J.
[8]Australian Securities and Investments Commission v Wealth and Risk Management Pty Ltd (No 2) [2018] FCA 59 Moshinsky J.
[9]Australian Securities and Investments Commission v Financial Circle Pty Ltd [2018] FCA 2 Moshinsky J.
[10]Australian Securities and Investments Commission v Financial Circle Pty Ltd (No 2) [2018] FCA 1644 O’Callaghan J.
The Applicant’s involvement in the WRM and Financial Circle businesses, his understanding of the attributes of those businesses, and his response to these decisions in a material way inform the disposition of the present application. Notwithstanding the sole remaining challenge in the present application concerns the Credit Banning Order, it is necessary to address the features of those businesses, the Federal Court’s criticisms of them, and the Applicant’s responses to those decisions as a part of these reasons.
THE LEGISLATION
The present application requires consideration of s 80(1), the s 5(1) definition of the term being involved in a contravention of a provision of legislation, s 37B, s 81, and s 47(1) of the NCCP Act, and s 32A of the Code[11] which are outlined, in that order, below.
[11]The National Credit Code in Schedule 1 to the NCCP Act.
Section 80 – conditions enlivening banning order powers
The relevant aspects of s 80 for present purposes are in the following terms:
(1)ASIC may, in writing, make one or more orders (banning orders) against a person:
……
(d)if the person has:
(i)contravened any credit legislation; or
(ii) been involved in a contravention of a provision of any credit legislation by another person; or
(e)if ASIC has reason to believe that the person is likely to:
(i)contravene any credit legislation; or
(ii)be involved in a contravention of a provision of any credit legislation by another person; or
(f)if ASIC has reason to believe that the person is not a fit and proper person to:
(i)engage in one or more credit activities; or
(ii)perform one or more functions as an officer (within the meaning of the Corporations Act 2001) of another person who engages in credit activities; or
(iii)control another person who engages in credit activities; or
(fa)if ASIC has reason to believe that the person is not adequately trained, or is not competent, to:
(i)engage in one or more credit activities; or
(ii)perform one or more functions as an officer (within the meaning of the Corporations Act 2001) of another person who engages in credit activities; or
(iii) control another person who engages in credit activities.
…
Section 5(1) – being involved in a contraventions of any legislation
The s 80(1)(d)(ii) foundation for a banning order, namely being involved in a contravention of any credit legislation by another person, draws in the s 5(1) definition of what constitutes being involved in a contravention of a provision of legislation which is in the following terms:
‘involved in’: a person is involved in a contravention of a provision of legislation if, and only if, the person:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced the contravention, whether by threats or promises or otherwise; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d)has conspired with others to effect the contravention.
Section 37B(2) – the fit and proper person test
The s 80(1)(f) foundation for a banning order, namely having reason to believe that a person is not a fit and proper person to engage in one or more of the activities as contemplated by s 80(1)(f), requires ASIC, and the Tribunal on review, to have regard to the matters set out in s 37B(2)[12] which, as are presently relevant, are in the following terms:
[12]See NCCP Act, s 37B(1).
…
(b)whether any of the following has ever been made against the person:
…
(ii)a banning order, or a disqualification order, under Division 8 of Part 7.6 of the Corporations Act 2001; and
...
(k)any other matter ASIC considers relevant.
Section 81 – scope and term of banning orders
A s 80 banning order can be absolute or directed to particular activities as provided for in s 81(1), which is in the following terms:
(1)A banning order made against a person may specify that the person is prohibited from doing one or more of the following:
(a)engaging in any credit activities;
(b) engaging in specified credit activities in specified circumstances or capacities;
(c)controlling, whether alone or in concert with one or more other entities (as defined by section 64A of the Corporations Act 2001), another person who engages in credit activities;
(d)performing any function involved in the engaging in of credit activities (including as an officer (within the meaning of the Corporations Act 2001), manager, employee, contractor or in some other capacity);
(e)performing specified functions involved in the engaging in of credit activities.
Other than where s 80(1)(fc)[13] applies, s 81(2) of the NCCP Act allows a banning order to specify that a particular prohibition specified in the order applies against the person … either permanently or for a specified period.
[13]NCCP Act, s 80(1)(fc) deals with the situation where a person has been an officer of 2 or more corporations that have engaged in credit activities and have been unable to pay its debts.
Section 47(1) – obligations on providers of credit
Section 47(1) imposes obligations on participants in the provision of credit, in the following terms:
General conduct obligations of licensees
General conduct obligations
(1)A licensee must:
(a)do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly; and
(b)have in place adequate arrangements to ensure that clients of the licensee are not disadvantaged by any conflict of interest that may arise wholly or partly in relation to credit activities engaged in by the licensee or its representatives; and
…
(f)maintain the competence to engage in the credit activities authorised by the licence; and
(g)ensure that its representatives are adequately trained, and are competent, to engage in the credit activities authorised by the licence; and
…
Assessment of whether compliance is adequate
(2)For the purposes of paragraphs (1)(b), (g), (k) and (l), in considering whether a matter is adequate, the nature, scale and complexity of the credit activities engaged in by the licensee must be taken into account.
(Emphasis added)
Section 32A of the Code – maximum permissible interest rate
Section 32A of the Code limits interest charges on loans in the following terms:
32A Prohibitions relating to credit contracts if the annual cost rate exceeds 48%
Entering into a credit contract
(1)A credit provider must not enter into a credit contract if the annual cost rate of the contract exceeds 48%.
Criminal penalty: 50 penalty units.
Objectives of the legislative scheme and banning orders
As the name of the NCCP Act indicates, the scheme of the legislation is concerned with consumer protection. The EM[14] noted that the power to ban a person from engaging in credit activities is intended to fulfill this function:
The intention of a banning order is to protect the public, rather than being an order to punish or impose a penalty (although this will usually be a necessary consequence). However, even where the individual is unlikely to commit an offence again, ASIC may decide to ban them where it is necessary to protect the public, including by deterring others who might otherwise be emboldened where misconduct is perceived to not result in any sanction.[15]
[14]Explanatory Memorandum to the National Consumer Credit Protection Bill 2009 (Cth).
[15]Ibid, [2.196].
ISSUES
At its broadest level, the issues for the Tribunal to determine the present application are:
(a)first, whether an NCCP Act s 80 banning order should be made; and
(b)second, if so, the scope[16] and duration[17] of such a banning order.
[16]NCCP Act, s 81(1).
[17]NCCP Act, s 81(2).
FACTS
The Applicant is aged 63 and has a work history that includes three years as a financial planner with the ANZ Bank,[18] and 15 years as a senior financial planner with the NAB,[19] both in Canberra. He came to Melbourne in 2009 and appears to have been self-employed for a number of years in various capacities, including in the provision of financial services and the provision of credit.
[18]Australia and New Zealand Banking Group Limited.
[19]National Australia Bank Limited.
The Applicant was employed by WRM from June 2016 until that company ceased carrying on business in May 2017. WRM and two related companies (JECA Holdings Pty Ltd, trading as Yes FS, and Yes FP Pty Ltd) were the subject of the WRM Decision permanently restraining them from engaging in financial services activities and imposing substantial penalties.
ASIC sought to argue that the Applicant was more than just a WRM employee. ASIC relied on the fact that the Applicant became a responsible manager[20] on 15 September 2016 and an email from the Applicant to Mr Fuoco in which he stated, It’s my certificate of appointment as co-RM for Yes FP. However, ASIC acknowledges that the Applicant was only a responsible manager for one day. The Applicant’s position as an employee for almost a year and the fact that he worked closely with other former WRM employees in setting up Financial Circle demonstrates that he had knowledge of the WRM business model and used, or permitted the use of, a similar business model at Financial Circle.
[20]The term responsible manager does not appear in the NCCP Act or the Corporations Act. The requirement to appoint responsible managers arises under ASIC guidance dealing with organisational competence of licensees: see ASIC Regulatory Guides RG 105 AFS Licensing: Organisational competence and RG 206 Credit licensing: Competence and training.
Together with four others who had worked at WRM, the Applicant set up the Financial Circle business. In October 2017, the Applicant became a director, and then sole director of Financial Circle.[21] The Applicant’s understanding was that for personal and/or religious reasons, the four others did not want to become directors, so the Applicant became the sole director.
[21]Financial Circle was previously known as Utopia Financial Services Pty Ltd and became Financial Circle on 19 August 2017.
Financial Circle held an AFSL[22] and an ACL,[23] the latter of which authorised it to engage in credit activities other than as a credit provider. That limited feature of Financial Circle’s ACL has an important bearing on the outcome in this application.
[22]Australian Financial Services Licence.
[23]Australian Credit Licence.
In relation to the ACL, the Applicant was responsible for matters including the oversight of lending activities, credit assessment, liaising with ASIC on matters relating to credit licences and business activities, compliance sign off on advertising, product and process changes and the monitoring, supervision and training of representatives to ensure they complied with the responsible lending obligations under the NCCP Act and various lender credit policies.[24]
[24]Affidavit of Anthony Wynd 18 October 2019, [19].
Financial Circle operated a business of providing financial advice and loans of between $2,000 and $5,000. Financial Circle also facilitated life insurance and transfers of superannuation fund balances where required to enable financial advice fees and insurance premiums to be paid by a fund that permitted those sorts of withdrawals from superannuation fund balances. Financial Circle operated for approximately 10 weeks, and had a total of 51 clients, and generated approximately $412,284 in advice fees and insurance premium commissions.
The four Federal Court decisions
As noted above, and explained further below, the four Federal Court decisions, their timing, certain of their findings, and the Applicant’s responses to them have a role to play in determining the present outcome. Each injunction decision was in response to an ASIC application seeking temporary restraining orders and each substantive decision was in response to an ASIC application seeking declarations, penalties and restraining orders. In each decision, historical facts were found, conclusions were drawn based on those facts and remedies granted.
The relevant aspects of the decisions are set out below.
The WRM Injunction Decision
The WRM Injunction Decision was the first of two decisions following an application brought by ASIC against WRM and two associated companies: JECA Holdings Pty Ltd, trading as Yes FS, and Yes FP Pty Ltd. In considering whether to grant interlocutory relief, Moshinsky J:
(a)observed that the evidence revealed that:
… in most cases: the [client] was attracted to the defendants’ offering by the prospect of obtaining a loan or cash payment; the financial advice is to the effect that the [client] should change superannuation funds and take out new or substitute insurance; the [client] receives a cash rebate representing the substantial part of the upfront commission; and the [client’s] superannuation balance is reduced by the advice fee paid to WRM and the insurance premium;[25]
(b)noted ASIC’s allegation that WRM or its associates lured people who had a poor credit history or standing and were in need of a loan or fast cash, to a website that represented that credit or loans could be provided, when in reality loans were neither available or provided and cash was made available through a process of taking advice, paying for it, taking out new insurance policies, paying for them and receiving an insurance commission rebate. ASIC alleged that WRM provided advice that was not in the best interests of the applicant, inappropriate and conflicted,[26] and that these practices breached a range of provisions of the ASIC Act [27] and the Corporations Act;[28]
(c)noted that ASIC had provided a report containing an opinion (supported by detailed material) that clients received advice that was not in their best interests and was inappropriate for them, that was not challenged by cross examination or contradicted by evidentiary material;[29] and
(d)concluded that:
(i)there were indications of very serious shortcomings in the standard of financial advice being provided by WRM’s authorised representatives and of WRM’s supervision of its authorised representatives;[30]
(ii)there was an appreciable risk that, if an interlocutory injunction was not granted, WRM would contravene ss 961L and 912A of the Corporations Act;[31] and
(iii)it would have been open to ASIC to have sought a broader interlocutory injunction relating to the provision of advice more generally rather than one directed to provision of advice coupled with cash rebates.[32]
[25]WRM Injunction Decision, [61].
[26]Ibid, [2] to [5].
[27]Australian Securities and Investments Commission Act 2001 (Cth).
[28]Ibid, [6] and [7].
[29]Ibid, [49].
[30]Ibid, [9] and [56].
[31]Ibid, [58].
[32]Ibid, [59].

Section 961L of the Corporations Act draws in ss 961B, 961G 961H and 961J. These provisions traverse matters materially wider, and more serious, than inducing people to a business under the pretence of a loan and providing cash rebates that were not loans. Further, ASIC’s allegations, as identified by his Honour in unequivocal terms, go well beyond a mere problem associated with offering loans and not providing loans. His Honour’s conclusions were to similar effect. These matters are telling in the context of the present application.
The WRM Decision
The WRM decision was the conclusion of ASIC’s application referred to above. Moshinsky J found that:
(a)WRM’s target client base comprised people with poor creditworthiness who needed relatively modest amounts of money and who could not borrow it, either at all or at reasonable rates;[33]
[33]WRM Decision, [17], [119], [145], [148] and [166].
(b)a website promoting WRM’s business represented that it provided credit and/or personal loans;[34]
[34]WRM Decision, [18].
(c)when individuals applied using an online application form, they were directed to a CSO[35] who would explain that:
[35]Customer Services Officer.
(i)it may be appropriate to alter the individual’s superannuation and insurance arrangements;
(ii)that any fees associated with obtaining advice would come from their superannuation accounts; and
(iii)any insurance premiums would also come from those accounts;[36]
[36]WRM Decision, [41].
(d)the financial advice provided usually recommended changes to the superannuation fund and always recommended the purchase or replacement of existing insurance;[37]
[37]Ibid, [48].
(e)rather than making a loan, WRM offered a cash rebate to individuals in connection with the giving of financial advice and taking out insurance;[38]
(f)the cash rebate payment was generated and paid from insurance commissions paid by the insurance provider;[39]
(g)as the process took six to eight weeks, some part of the rebate could be provided as emergency cash for a cost of $200;[40]
(h)WRM received the advice fee from the superannuation fund (between two and 20 per cent of superannuation balances); an up-front commission and ongoing commission from the insurance provider;[41]
(i)the on-going insurance premiums were a substantial portion of the employer’s annual superannuation contribution and sometimes exceeded it;[42]
(j)Joshua Fuoco (who was added as a defendant to the WRM proceeding) was the director and sole shareholder of each company and was the mastermind and architect of the business model;[43]
(k)the financial advice provided to these WRM clients was not in their best interests and inappropriate;[44]
(l)the defendants did not provide debt management advice to clients, even where such advice was sought by clients in their application form;[45]
(m)marketing material did not contain any foreshadowing of any impost on client’s superannuation;[46]
(n)the defendant’s … systems for determining the advice to provide and its largely-predetermined advice were directed at “shepherding” clients into switching their insurance and/or superannuation, not managing their existing debt.[47]
[38]Ibid, [15].
[39]Ibid, [47].
[40]Ibid, [29].
[41]Ibid.
[42]Ibid.
[43]Ibid, [131].
[44]Ibid, [122].
[45]Ibid, [31].
[46]Ibid, [19].
[47]Ibid, [95].
Moshinsky J was scathing in his criticism about every aspect of the WRM business model describing the behaviour of the parties as unconscionable and predatory.[48] He concluded that WRM and the other defendants contravened various provisions of the Corporations Act and the ASIC Act, including:
(a)carrying on a financial services business without an appropriate licence;[49]
(b) failure to supervise authorised representatives;[50]
(c)contravention of the obligation to ensure advice was provided efficiently, honestly and fairly;[51]
(d) provision of advice that was not in the clients’ best interests;[52] and
(e)provision of advice that was misleading or deceptive, including representations that loans could be made, that cash was available within 24 to 72 hours of receipt of an application and that debt management advice was available.[53]
[48]Ibid, [172].
[49]Ibid, [72].
[50]Ibid, [113].
[51]Ibid.
[52]Ibid, [122].
[53]Ibid, [85].
Moshinsky J made various declarations and orders against WRM and the other defendants, including permanent injunctions and imposed pecuniary penalties totalling $7.8 million.
In the present context, Moshinsky J’s wider findings and/or declarations that:
(a)the behaviour of the defendants was unconscionable and predatory;
(b)WRM’s marketing material did not contain any foreshadowing of any impost on clients’ superannuation;
(c)the defendant’s systems were directed at … “shepherding” clients into switching their insurance and/or superannuation, not managing their existing debt;
(d)the defendants had:
(i)failed to supervise authorised representatives;
(ii)contravened the obligation to ensure advice was provided efficiently, honestly and fairly;
(iii)provided advice that was not in the clients’ best interests; and
(iv)provided advice that was misleading or deceptive;
that went beyond criticism of offering loans when loans were not provided are, again, telling in the context of the present application.
Financial Circle Injunction and Financial Circle Decisions
The third and fourth Federal Court decisions, the Financial Circle Injunction and Financial Circle Decisions, had their origins in the WRM Injunction Decision and an ASIC investigation of Financial Circle in November 2017. Those investigations revealed to ASIC what it perceived as similar problems to those apparent in the WRM business. ASIC commenced Federal Court proceedings first seeking an interim injunction, and then declarations, banning orders and pecuniary penalties that led to a settlement agreement between ASIC and Financial Circle, and ultimately the banning order and pecuniary penalty against Financial Circle reflected in the Financial Circle Decision. The settlement agreement provided, among other things, that Financial Circle admitted the allegations and the particulars contained in the Statement of Claim; and consented to the Court making orders for declarations, injunctions, civil penalties and costs as set out in the agreement.[54]
[54]Financial Circle Decision, [2].
Financial Circle Injunction Decision – historical facts found
In the Financial Circle Injunction Decision, Moshinsky J noted that:
(a)ASIC commenced its investigation into the WRM business in March 2017,[55] and obtained interlocutory injunctions on May 2017[56] whereupon the companies ceased operations.[57] Those who managed WRM’s business then set about considering changes to the business model.[58] Financial Circle was acquired in August 2017 and began operations that month;[59]
(b)Financial Circle’s Senior Management Committee consisted of the Applicant, Aflal Hussein, Arufa Hussein, Hizni Haleem and Ken Maher. Each of these individuals worked in the Fuoco Group;[60]
(c)all of Financial Circle’s CSOs previously worked for the Fuoco Group, as did their manager, and an Authorised Representative. Mr Fuoco’s mother worked at Financial Circle as a payroll officer and was a signatory to Financial Circle’s bank accounts;[61]
(d)the template documents used by Financial Circle, in the course of providing financial advice, appeared to be an updated iteration of template documents used at WRM, although they bore the Financial Circle logo;[62]
(e)Financial Circle had a panel of private funders who provided funding for the advancement of loans to clients of Financial Circle. The Fuoco family was part of that panel. Of the 51 loan arrangements in place with Financial Circle clients (at the time of the Applicant’s examination pursuant to s 19 of the ASIC Act), at least 30 had been funded by the Fuoco family;[63] and
(f)Financial Circle provided access to budgeting software called Moneysoft for a period of 12 months for free, but a fee of $550 for advice in relation to budgeting, savings, cash flow and debt management was retained by Financial Circle from insurance commissions.[64]
[55]Financial Circle Injunction Decision, [18].
[56]Ibid, [19].
[57]Ibid.
[58]Ibid.
[59]Ibid, [2].
[60]Ibid, [25].
[61]Ibid.
[62]Ibid.
[63]Financial Circle Injunction Decision, [25].
[64]Ibid, [59].
Financial Circle Injunction Decision – evaluation and conclusions drawn
Moshinsky J acknowledged the submission made on behalf of Financial Circle that:
… the company was principally a provider of financial services rather than a lender, and saw benefit in coupling the provision of the two services. It was further submitted that the client was not ‘locked in’ by any trick or tactic as the arrangements were fully disclosed before the client was required to commit to anything.[65]
but took the view that:
this characterisation of the principal aspect of Financial Circle’s business does not sit easily with the way it presents itself on the Website.
[65]Ibid, [87].
After reviewing in some detail the steps involved in navigating Financial Circle’s website,[66] Moshinsky J concluded that:
While it is true that the client is told the costs of obtaining and implementing the financial advice before he or she is committed to the arrangement, this information is not easily discerned from the Website and the client is only informed about these matters in person once the application process is well underway. In any event, the client’s financial circumstances and desire for the loan may well lead the client to accept the advice and pay the (substantial) financial advice fee (from his or her superannuation fund) whether or not the client actually needs or wants the advice.[67] (Emphasis added)
and that there was an appreciable risk that Financial Circle was a lender and had contravened s 29 of the NCCP Act.[68]
[66]Ibid, [31] to [49].
[67]Ibid, [87].
[68]Ibid, [96].
Moshinsky J granted the interlocutory injunctions sought by ASIC and noted that there were four sets of contraventions that needed to be determined:
(a)unconscionability in providing financial services;
(b)misleading and deceptive conduct;
(c)failure to provide financial advice efficiently, honestly and fairly; and
(d)providing credit without an appropriate ACL i.e. a credit provider licence – a contravention of s 29 of the NCCP Act.[69]
[69]Ibid, [3].
Financial Circle Decision
In the hearing that preceded the Financial Circle Decision, neither the defendant nor its director (the Applicant) appeared, but Financial Circle entered into a settlement agreement admitting all of the allegations against it as noted above. However, the settlement agreement was not the only evidence relied on by O’Callaghan J in finding facts and drawing his conclusions. His Honour had regard to:
(a)the Financial Circle website and its marketing and application process;[70]
(b)an independent expert report in relation to compliance with reasonable industry practice (i.e. policies, processes and training) with respect to the AFSL;[71]
(c)affidavits of Financial Circle clients (A, B, C and D)[72] in relation to contraventions related to unconscionability with respect to loan applicants; and
(d)a report and opinion of an ASIC employee, Simon Kerr, in relation to the outcomes for applicants and whether Financial Circle acted in the best interests of the clients.[73]
[70]Financial Circle Decision, [74] – [80].
[71]Ibid, [116] – [128].
[72]Ibid, [111] – [112].
[73]Ibid, [44] – [52].
Given the approach to be adopted for the Financial Circle Decision conclusions noted below, it is unnecessary to embark upon an analysis of the appropriateness of opinion evidence from an ASIC employee whose experience and independence were noted by the Applicant.
Financial Circle Decision – historical facts found
The Applicant has accepted the findings by the Court about the application process, the nature of the services provided, and the fees charged.
The historical facts found in the Financial Circle Decision included that:
(a)Financial Circle targeted persons seeking loans who had a bad credit history and were likely to have low levels of financial literacy and poor financial management skills,[74] using internet-based marketing tools including Google AdWords to direct persons to the website upon entering search terms including bad credit loans, small loans no checks, fast cash loans, money lenders, unsecured loans 20000 bad credit, [and] 1500 loan no credit check monthly payments…;[75]
(b)Financial Circle’s target market was individuals who were desperate for money and had few options available to them to obtain a loan;[76]
(c)the loans were made at a rate of six per cent per annum with the money being provided by private funders;[77]
(d)notwithstanding the private funders being the providers of money loaned, the loan contracts referred to Financial Circle as the lender and were on Financial Circle letterhead with the Financial Circle logo;[78]
(e)when individuals applied to Financial Circle for a loan, they were required to obtain financial advice and to take out new insurance policies;[79]
(f)if the individual refused the advice or the insurance, they did not qualify for a loan;[80]
(g)the financial advice sometimes required the individual to switch their superannuation provider to one that permitted access to the funds to pay for the financial advice and always required them to take out new insurance;[81]
(h)Financial Circle received a small fee for the making the loan ($400) but derived most of its income from the financial advice fees paid by applicants from their retail superannuation funds and commissions paid by insurance providers to Financial Circle in respect of new insurance policies;[82]
(i)with respect to the 51 clients, Financial Circle provided loans of between $2000 and $5000, and received on average $8,084 per client by way of an advice fee and upfront commissions on insurance, a total of $412,284;[83] and
(j)the requirement to accept financial advice and take out new insurance was not disclosed on the Financial Circle website which noted that there were no requirements, features or fees other than those appearing on the website.[84]
[74]Ibid, [8].
[75]Ibid, [15].
[76]Ibid, [103].
[77]Ibid, [55] and [57].
[78]Ibid, [56].
[79]Ibid, [102].
[80]Ibid, [76].
[81]Ibid, [33].
[82]Ibid, [55].
[83]Ibid, [193].
[84]Ibid, [75].
Part of the matrix of historical factual material contained in the Financial Circle Decision is a reproduction of some statistics taken from a sample of 12 loan files analysed by Mr Kerr. That evidence was:
Mr Kerr’s review of 12 clients serviced by Financial Circle discloses that:
(1) upon implementation of the advice, the clients’ superannuation balances were immediately reduced by between 5% to 30%, and by between $5,000 and $10,000; and
(2) in five years’ time, the applicants’ superannuation balances were likely to reduce by an average of $11,550 due to implementation of the advice.[85]
[85]Ibid, [173].
Financial Circle Decision – evaluation and conclusions drawn
O’Callaghan J noted that Financial Circle had:
… engaged in the contravening conduct in circumstances where it knew or ought reasonably to have known that it was not compliant with financial services laws. Further, it appears that Financial Circle’s management ignored the Court’s concerns about the WRM business model as articulated in the judgment delivered at the time interlocutory injunctions were ordered against WRM and its associated entities, and set up a similar business regardless.[86]
and that
…the contraventions arose out of deliberate strategies formulated at the highest level of management. After the injunction was granted against WRM and associated entities, individuals associated with WRM discussed the further development of the cash rebate scheme into the model offered by Financial Circle – the only significant difference being that loans were offered instead of cash rebates.[87]
[86]Ibid, [171].
[87]Ibid, [197].
O’Callaghan J concluded, among other things, that:
(a)Financial Circle's business was substantially the same as the cash rebate scheme that had been operated by WRM and its associated entities;[88]
(b)Financial Circle was acting as a credit provider: The loan assessment forms identified Financial Circle as the credit provider; the loan contract named Financial Circle as the lender and the monies were paid from Financial Circle’s bank account to the borrower’s bank account;
(c)Financial Circle was a lender without a licence;[89]
(d)Financial Circle failed to act honestly when its advisers made recommendations to applicants to switch their superannuation provider and acquire insurances without having reasonable grounds to make those representations;[90] and
(e)Financial Circle's advisers did not comply with their obligations to act in the best interests of the applicants, give appropriate advice and give priority to the applicant’s interests.[91]
[88]Ibid, [11].
[89]Ibid, [147].
[90]Ibid, [105].
[91]Ibid, [106].
O’Callaghan J devoted six paragraphs to the credit licence issue as follows:[92]
[92]Ibid, [142] – [147].
142. The National Credit Act was introduced to:
prescribe conduct of relevant participants where: ‘credit products in the market [have] made it much less straightforward for consumers to determine whether a product is suitable for their needs and [has] increased their dependence on intermediaries” and “[a]s a result there are considerable information asymmetries that justify regulatory intervention” [Australian Securities and Investments Commission v Channic Pty Ltd & Ors (No 4) [2016] FCA 1174 at [13] (Greenwood J, quoting from the Revised Explanatory Memorandum)]
143. Section 29 of the National Credit Act provides that a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.
144. The licensing scheme aims to protect consumers by ensuring that only fit and proper persons are authorised to provide credit, and by imposing responsible lending obligations on holders of an Australian credit licence: see National Credit Act, chapters 2 and 3.
145.Financial Circle holds an Australian credit licence that authorises it to engage in credit activities other than as a credit provider; that is, other than as a person who provides credit: [NCCP Act], s 5(1) ‘credit provider’; National Credit Code, s 204(1) ‘credit provider’.
146.Despite this, it is named as the ‘lender’ on the loan contracts. There is no evidence that any other party, holding an appropriate licence, is providing the credit.
147.Financial Circle therefore contravened s 29 of the [NCCP Act] by engaging in a credit activity, namely entering into credit contracts as a provider of credit without a licence authorising it to do so.
The end result of the Financial Circle Decision was that O’Callaghan J:
(a)made eight declarations relating to offending conduct in relation to financial services activities;
(b)made one declaration that Financial Circle had contravened the NCCP Act by entering into credit contracts as a provider of credit without a licence authorising it to do so;
(c)granted permanent injunctions against Financial Circle engaging in any financial services or credit activity; and
(d)imposed pecuniary penalties totalling $8.98 million.[93]
[93]Ibid, Orders 3 – 8.
THE APPLICANT’S EVIDENCE

The Applicant gave evidence that he genuinely wanted to assist people who were in financial difficulties.
The Applicant accepted or confirmed that:
(a)Financial Circle clients were not seeking to obtain financial advice or to take out insurance or to revise insurance arrangements when they approached Financial Circle;[94]
[94]Transcript of evidence, p 94.
(b)a person living hand to mouth financially would be unlikely to have the wherewithal to warrant paying for financial advice;[95]
[95]Ibid, p 133.
(c)Financial Circle relied on insurance commissions and fee income from providing financial advice for its revenue;[96]
[96]Ibid, p 127.
(d)there had been a contravention of s 29 of the NCCP Act by Financial Circle, although the Applicant characterised this as having the wrong licence. He said:
Our credit licence was flawed, we were not operating under the right licence. I didn’t know that at the time. That was not what I was advised;[97]
[97]Ibid, p 19.
(e)the historical facts found in the WRM decisions, the Financial Circle Injunction Decision and the Financial Circle Decision are accurate,[98] but he disputed the interpretation of these facts and the severity of the outcome;
[98]Ibid, p 166-7.
(f)the target market for each of the WRM and Financial Circle businesses was people who had a relatively urgent need for money and who could not otherwise raise it;[99]
[99]Ibid, p 70.
(g)clients/borrowers were required to obtain financial advice and to implement the advice before they would be advanced a loan;[100]
[100]Ibid, p 166-7.
(h)that the cost of the financial advice was to come from superannuation fund balances;[101]
[101]Ibid, p 58.
(i)the amounts charged for financial advice were market rates for financial advice but high in the circumstances;[102]
[102]Ibid, p 68.
(j)the clients/borrowers were required to take out new life insurance as recommended by both WRM and Financial Circle;[103]
[103]Ibid, p 68.
(k)the cost of the life insurance premiums was to come from superannuation fund balances;[104]
[104]Ibid, pp 70-71.
(l)Financial Circle generated income of approximately $412,284 from a business operation which lasted a matter of four months and involved making loans to 51 clients of between $2,000 and $5,000;[105]
[105]Ibid, p 70.
(m)the interest paid by borrowers was on-paid to the funding providers, however Financial Circle retained the loan application fee;[106]
[106]Ibid, p 91.
(n)the funding providers formally approved the loans being made on the recommendation of the Applicant;[107]
[107]Ibid, pp 129-30.
(o)he was the sole director and had overriding responsibility for the credit side of things;[108]
(p)he had responsibilities which included:
(i)oversight of lending activities, credit assessment, liaising with ASIC on matters relating to credit licences and business activities;
(ii)compliance sign off on advertising product and process changes,
(iii)monitoring and supervising and training staff to ensure they complied with the NCCP Act;
(iv)responsible lending obligations; and
(v)the various lender credit policies;[109] and
(q)he thought Financial Circle was acting as an intermediary between peer lenders and borrowers for applicants, and that he honestly believed that the licence they purchased was adequate for that purpose to enable the company to arrange peer to peer loans (loans between clients and private lenders).[110]
[108]Ibid, p 60.
[109]Ibid, p 62.
[110]Ibid, p 160.
In the course of the hearing the Applicant was asked several times whether he would do things differently. His response was that he wished they had charged clients a bit less, although he claimed that the amount charged was not out of order by industry standards. The Applicant was asked if he thought it was acceptable to charge advice fees out of the superannuation funds. His response was:
It’s legal, it’s an industry standard. If you don’t think they should do it, tell the government to change the rules.[111]
[111]Ibid, p 69.
In response to questions from the Tribunal concerning his understanding of the WRM business model and how WRM made its money, the Applicant said:
… WRM made its money from fees charged for advice, and the way it got the opportunity to give that advice was deceptive and misleading, I guess, and we have to accept Moshinsky J’s finding on that, that it held out to people the prospect of getting a loan, and when people applied for that loan they were told, “Look, you don’t qualify for a loan, but there’s another way you can get some cash. We can do some insurance in your super and we can give you a rebate.” I can absolutely understand how Moshinsky J would strike that – strike that down. ….[112]
[112]Ibid, p 57.
and in a response to a question concerning that business model allowing people to get access to their superannuation, the Applicant said:
Well, that’s quite illegal, so it wasn’t that, but it was nudging that. So basically what would happen is that if a WRM advisor organised insurance through the client’s superannuation fund, the premium for that might be four, five, six thousand dollars. The commission for that might be four, five, six, thousand dollars. Out of – so – so any funds that were taken out of the member’s super fund went to a licensed insurance company for retail insurance, so that’s all kosher. From the commission that was generated by that, a share of that was given to the client, and no recourse – rebate of the commission. So commission rebate models exist out there, and they’re not illegal, and not outlawed, but certainly in WRM’s case the – the principle problem I thought, you know, the cancer at the heart of it, as it turned out, as more was revealed and Moshinsky J’s findings came to light, was that how the clients were acquired, that they were acquired with this promise of a loan which could never be fulfilled because there never was a loan.[113] (Emphasis added)
and in answer to a question as to how much money WRM made the Applicant said:
… I wasn’t privy to the sort of construction of WRM and the maths of it, but I would have thought that those people were probably charged a fee of around sort of three to four thousand or something for the advice …[114]
and in answer to a question as to whether WRM made more from each transaction than the clients received the Applicant said:
Look, honestly I couldn’t say. I’m not that familiar with – I’m not that familiar with the accounts of WRM, I never saw the accounts of WRM. But I would have said that yes, that – it would have cost them – it would have cost their super fund probably five, six, seven, eight thousand dollars to get three or four thousand dollars.[115]
and in answer to a question as to whether that was the core of what is wrong with the WRM business model the Applicant said:
… Yes. Well, those things, individually are okay. It’s okay – unless we’re talking about WRM here – it’s okay, under the legislation, for an advisor to charge a superannuation fund a fee for giving advice to a member. It’s also quite okay for a member to pay for insurance cover out of their superannuation fund. It’s also quite okay for someone receiving a commission for insurance to rebate some of that commission back to the client. So all of those elements individually are okay, are legal. But then you overlay in the WRM case how the clients were obtained and that’s the - - -[116]
[113]Ibid, p 58.
[114]Ibid.
[115]Ibid.
[116]Ibid.
THE APPLICANT’S CONTENTIONS
The Applicant contends, at the broadest level either that a ban ought not be imposed, or if one is appropriate it should not be permanent and he should be permitted to do what he did for many years without issue - assisting people with loan applications. These contentions are the conclusions the Applicant seeks based on a series of more detailed contentions that can be summarised as follows:
(a)the financial services issues and matters are effectively closed now that the challenge to the Financial Services Banning Order has been abandoned;
(b)the only NCCP Act finding of the Federal Court concerned Financial Circle not having the required licence for the activities it conducted;
(c)there has never been any finding that the loans Financial Circle made were inappropriate;
(d)the loans at an interest rate of approximately six per cent were themselves of benefit to the clients and were good loans for clients who did not have many other options, and were good value;
(e)other short-term loans for clients with poor credit ratings would be likely to have an interest rate of 48 per cent (the maximum that can be charged under the Code), plus a loan fee of $400 (also charged by and retained Financial Circle, plus a monthly account keeping fee and a fortnightly direct debit fee);
(f)while high, the financial advice fees were legal, were industry standard and within market ranges and if considered too high the rules should be changed;
(g)ASIC’s focus (and the Court’s focus in the Financial Circle Decision) was on the fees charged by, and the commissions rebated to Financial Circle (that came from the clients’ superannuation funds, or were paid by the insurer issuing the insurance policy after receipt of premiums paid from the clients’ superannuation funds) and that this focus was, and is, on one side of the ledger only and that it ignored or failed to recognise that there were other benefits arising for clients that have not been given sufficient weight, including:
(i)access to needed funds;
(ii)improved credit rating;
(iii)advice about investment options in superannuation that could be advantageous. (No further evidence by way of sample advices was provided to corroborate this contention);
(iv)a superior, retail as opposed to group, insurance product that was of great benefit to clients, although the Applicant accepted that the retail insurance was also a comfort to the lender as it ensured that repayments would be made in relation to the loan; and
(v)budgetary or financial planning advice that permitted clients to monitor and change spending patterns. No evidence was provided about the nature or content of this advice, other than the Applicant’s evidence that clients were provided with access to a software program called Moneysoft,
that together would improve borrowers’ lives in the long term;
(h)the Applicant pointed to three clients (chosen from the 51 clients who obtained loans from Financial Circle) to support these contentions regarding other benefits. One client had several short-term loans that required repayments of $1200 per month, with monthly after-tax income of $7606 and surplus income (after rent and other expenses) of $1082. Replacing these loans with one loan would free up disposable income, improve the client’s credit profile and enable the client to build up savings (including superannuation). Another client had an urgent need for money to pay for dental work for her mother and secured a loan. Another needed new tyres for his car so he could get to work, and secured a loan for that purpose. According to the Applicant, these were all good loans because they enabled people to achieve things that they needed attended to;
(i)amounts deducted from superannuation could be replenished over time and that to look at a one-off immediate hit to a superannuation fund only looks at one aspect of the arrangement the borrower entered into, and that if clients were able to manage their cash flow better with the budgeting tools made available, they may have been in a position to contribute to their superannuation balances in the future;
(j)not all clients were required to switch superannuation funds and whether they did depended on whether the fund allowed fees for financial advice to be deducted from the fund;
(k)the problem with the WRM business model was that it suggested it was lending money when in fact it was passing on insurance rebates to its clients;
(l)in setting up Financial Circle, the Applicant and his colleagues took what they believed was good from the WRM business model and reproduced it in the Financial Circle business model, and believed that they had fixed up the problematic bit, namely the absence of a real loan, by ensuring that a real loan was made in the Financial Circle business model;
(m)the Financial Circle Decision findings should be treated with caution because:
(i)the evidence presented by ASIC was unchallenged; and
(ii)the Federal Court had not addressed the issue relating to credit activities in any detail, but rather concentrated on the financial services breaches; and
(iii)that findings concerning excessive charges were based on a one-sided assessment of cost to the superannuation fund; and
(iv)that findings that clients were vulnerable was unchallenged; and
(n)the Applicant believed that the loans provided by Financial Circle were good value for clients;
(o)the mistake that was made from a credit regulation perspective was that Financial Circle had the wrong licence, which was something the Applicant was not aware of;
(p)the mistake of having the wrong licence type was linked to the fact that the providers, the source of money made available to borrowers, were believed by the Applicant to be peer lenders who were making peer to peer loans. The Applicant did not address how this would have been permitted under the ACL held by Financial Circle. The Applicant either did not consider Financial Circle to be a lender or did not realise it was a lender;
(q)the nature of any administrative penalties should have taken into account the belief by the Applicant that Financial Circle was acting as an intermediary and not as a credit provider and that the credit licence held by Financial Circle authorised it to arrange loans between clients and private lenders, where the lender approved all loans, although they invariably acted on the recommendation of the Applicant (on behalf of Financial Circle);
(r)while he and Financial Circle had made mistakes, the Credit Banning Order, particularly its permanence, is excessive because:
(i)he had not acted dishonestly;
(ii)many of the relevant issues had not been properly examined by either ASIC or the Court because Financial Circle did not have the resources to contest the case against it;
(iii)Financial Circle only operated for a matter of weeks and had only 51 clients;
(iv)neither Financial Circle nor ASIC received any complaint from any of its client borrowers;
(v)nobody else involved in either of the WRM and Financial Circle businesses has been subject to ASIC sanction, which the Applicant claimed suggests that the relevant conduct must not be regarded as serious;
(vi)nobody involved in management of the financial and credit service providers who were excoriated by the Hayne Royal Commission,[117] that was convened to enquire into their conduct, has been sanctioned by ASIC and Financial Circle’s activities are not as egregious as the behaviours and activities exposed in the Royal Commission;
(vii)the circumstances set out in ASIC’s guidance in Regulatory Guide RG 218 (discussed below), dealing with when a permanent ban is appropriate, are much more serious than the conduct of Financial Circle and the Applicant (as its sole director) engaged in; and
(viii)ASIC’s reluctance to consider a more limited ban is prejudicial.
[117]The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry conducted by the Honourable Kenneth Madison Hayne AC QC.
ASIC’S CONTENTIONS
ASIC relies on the four grounds in ss 80(1)(d) (particularly s 80(1)(d)(ii)), 80(1)(e), 80(1)(f) and 80(1)(fa) in support of the decision to impose the Credit Banning Order. Paragraph 80(1)(fa) was inserted into the NCCP Act in February 2020.[118]
[118]Inserted by the Financial Sector Reform (Hayne Royal Commission Response - Stronger Regulators (2019 Measures)) Act 2020.
ASIC contends that :
(a)based on the seriousness of the breaches by Financial Circle, and the role of the Applicant as sole director and responsible manager, a total and permanent ban was appropriate;
(b)there was reason to believe that the Applicant was not a fit and proper person because of his involvement in Financial Circle and allowing Financial Circle to operate in such a way led to the Federal Court making the nine declarations against Financial Circle;
(c)the Financial Circle business model was similar to the WRM business model in relevant respects;
(d)s 80(1)(fa), which was added to the legislation in February 2020,[119] as a result of recommendations made by the Hayne Royal Commission, should also be considered by the Tribunal, notwithstanding that it was not considered by the decision maker, if the Tribunal has reason to believe that the Applicant is not adequately trained, or is not competent;
(e)that the Applicant was responsible for the serious misconduct of Financial Circle. He was responsible for, or closely involved with, the design and implementation of a business model that served to exploit some of the most vulnerable consumers of credit products and financial services for profit;
(f)that the Applicant failed to meet his duties as responsible manager of Financial Circle to prevent the misconduct and ensure compliance with financial services laws and fulfilment of the obligations of a licensee;
(g)that the Applicant’s attitude to his actions demonstrates that he is a person from whom investors and consumers need to be protected;
(h)the Applicant’s attempts to downplay the seriousness of Financial Circle’s activities demonstrates a lack of insight into the wrongdoing and presents risk of future contraventions;
(i)that the Applicant has admitted to the contravening conduct of Financial Circle by entering into a settlement agreement with ASIC in the Federal Court proceedings admitting to each and every allegation; and
(j)that the admission was done in self-interest, and offered without insight into the gravity of the wrongdoing.
[119]Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures)) Act 2020.
ASIC relies heavily on the WRM Injunction Decision, the WRM Decision, the Financial Circle Injunction Decision and the Financial Circle Decision and the facts found therein to support the Credit Banning Order.
CONSIDERATION
Before addressing whether, and if so how, ss 80 and 81 of the NCCP Act apply in the Applicant’s circumstances, it is necessary to address a number of matters which inform the present outcome.
Efficiently, honestly and fairly - s 47(1)(a)
As noted above, s 47(1)(a) of the NCCP Act requires a licensee to do all things necessary to ensure that the credit activities authorised by the licence are engaged in efficiently, honestly and fairly. In the Financial Circle Decision, O’Callaghan J,[120] noted that the phrase efficiently, honestly and fairly had been considered in the Camelot Derivatives[121] decision where, in the context of s 912A(1)(a) of the Corporations Act, the Court said:
(a)the words ‘efficiently, honestly and fairly’ must be read as a compendium describing a person who goes about their duties efficiently having regard to the dictates of honesty and fairness, honestly having regard to the dictates of efficiency and fairness, and fairly having regard to the dictates of efficiency and honesty;
(b) The words “efficiently, honestly and fairly” connote a requirement of competence in providing advice and in complying with relevant statutory obligations. They also connote an element not just of even handedness in dealing with clients but a less readily defined concept of sound ethical values and judgment in matters relevant to a client’s affairs.
(c) The word “efficient” refers to a person who performs his duties efficiently, meaning the person is adequate in performance, produces the desired effect, is capable, competent and adequate. Inefficiency may be established by demonstrating that the performance of a licensee’s functions falls short of the reasonable standard of performance by a dealer that the public is entitled to expect.
(d)it is not necessary to establish dishonesty in the criminal sense. The word ‘honestly’ may comprehend conduct which is not criminal but which is morally wrong in the commercial sense.
(e)the word ‘honestly’ when used in conjunction with the word ‘fairly’ tends to give the flavour of a person who not only is not dishonest, but also is ethically sound.[122]
[120]Financial Circle Decision, [137].
[121]Australian Securities and Investments Commission v Camelot Derivatives Pty Ltd (in liquidation) [2012] FCA 414.
[122]Financial Circle Decision, [137].

These are guiding principles which apply equally in the NCCP Act setting.
Involved in a contravention – s 5
As noted above, s 80(1)(d)(ii) of the NCCP Act allows ASIC to make a banning order, inter alia, if a person has been involved in a contravention of a provision of any credit legislation by another person. Section 5 of the NCCP Act, also noted above, defines the notion of involved in a contravention of a provision of legislation. The broadest part of that definition is paragraph (c), that is, the person has been in any way … knowingly concerned in the contravention.
Moshinsky J considered the meaning of a person being knowingly concerned in a contravention in the WRM Decision.[123] He concluded that [a] person will be knowingly concerned in a contravention if that person was an intentional participant in the contravention, with knowledge of the essential elements constituting the contravention at the time of the contravention.[124] The knowledge of the person can be constructive knowledge.[125] Further, it is not necessary that the person know that the essential elements amount to a contravention.[126]
[123]WRM Decision, [130].
[124]Ibid, [130] referring to Yorke v Lucas (1985) 158 CLR 661.
[125]Ibid, [130] referring to Young Investments Group Pty Ltd v Mann (2012) 293 ALR 537.
[126]Ibid, [130] referring to Yorke v Lucas (1985) 158 CLR 661.
The fit and proper person test – s 37B
In forming a view as to whether there is reason to believe that a person is not a fit and proper person to engage in credit activities, ASIC, and therefore the Tribunal, must have regard to the matters in s 37B(2)[127] which are set out above.[128]
[127]These matters were previously set out in s 80.
[128]At para [7] above.
The term fit and proper person appears in various statutes and statutory schemes. It does not have a fixed meaning and so its meaning is influenced by the context on which it appears. The present context is the NCCP Act and the objectives it serves, which are noted above – consumer protection in a credit setting. The fit and proper person aspect of the legislative scheme needs to be considered in this context. According to the original EM, the notion of when a person is not a fit and person includes where the person lacks appropriate knowledge, skills, judgment or character.[129] (Emphasis added).
[129]Explanatory Memorandum to the NCCP Bill, [148].
ASIC sought to rely on the Applicant’s involvement in the contravention of s 29 of the NCCP Act and the contraventions relating to the AFSL to determine that the Applicant was not a fit and proper person. These matters are not referred to in s 37B(2). However, ASIC contends that s 37B(2)(k) permits consideration of any matter, unconstrained by the types of matters in the preceding paragraphs. The Tribunal does not need to consider the scope of s 37B(2)(k) in this case because the Tribunal must have regard to the fact that a banning order under the Corporations Act has been made.[130]
[130]NCCP Act, s 37B(2)(b)
The Applicant’s employment role with WRM
Beyond acceptance that the Applicant had been a WRM employee, the Applicant’s involvement in WRM’s business was a topic of dispute. The extent of the involvement is largely tangential to the issues to be determined by the Tribunal. In particular, whatever significance ASIC attempted to attach to the Applicant being recorded as a responsible manager for WRM is misplaced. The Applicant’s evidence was that it was a mistake. That evidence is entirely consistent with the extremely brief period for which he was so recorded and the explanation given in writing, at the time, for his removal, namely that he was mistakenly so recorded. Contemporaneous documents that are entirely consistent with a very short period are compelling in this case. The Tribunal accepts that a mistake was made and corrected very shortly thereafter.
It is clear, however, that the Applicant was familiar with the WRM business operations and business model, had read the WRM Injunction Decision and later the WRM Decision, and concluded (quite incorrectly) that the problem with the WRM business model was that it gave the appearance that it was lending money when it was not, and that the rest of the business model was acceptable.
Impact of Federal Court findings
As noted above, the context for the present matter includes the WRM Injunction Decision, the WRM Decision, the Financial Circle Injunction Decision and the Financial Circle Decision, each of which reached adverse conclusions concerning the respective business activities that were the focus of attention. ASIC relies on those conclusions.
The present matter is not a case where decisions concerning prior offending conduct, for example a conviction for a serious offence, are foundations for exercise of a power, and therefore the present matter is not a case where considerations such as those canvassed in HZCP[131] apply. In the present matter, the Tribunal is obliged to come to its own view of the evidence before it, which may not be the same as the evidence before either ASIC or the courts, the facts that ought be found based on that evidence, and what ought flow from those facts. Strict adherence to recognition of prior conclusions, and the essential facts on which they were based, without question or challenge, is not the approach to be adopted. In the present circumstances it is appropriate to consider the evidence before the Tribunal and adopt an approach to finding the relevant facts that is appropriate in the circumstances.
[131]HZCP v Minister for Immigration & Border Protection [2018] FCA 1803, Bromberg J. at [78]-[95].
That said, the Federal Court decisions are of some significance in two respects. First, because they detail historical facts that are not challenged, and second, because they provide insights to the Applicant’s understanding of the characterisation of Financial Circle’s business activities in an NCCP Act setting and from an NCCP Act perspective. This, in turn, informs whether some of the threshold conditions for a banning order are satisfied. In each of the Federal Court decisions, historical facts were either found, or assertions as to them were recognised, and conclusions in the nature of evaluations or judgements arising from the historical facts were reached.
The Applicant was involved in the litigation that led to the Financial Circle Decision. It is not apparent that there was any dispute, or contrary evidence led on behalf of Financial Circle, in relation to the historical facts as recorded by O’Callaghan J in the Financial Circle Decision. In the present application, the Applicant does not dispute the historical facts as recorded in either the Financial Circle Injunction Decision or the Financial Circle Decision. However, the Applicant asserts that the conclusions reached that were based on those facts ought be received with care because Financial Circle did not have the wherewithal to fund a disputed court case, with the effect that those conclusions were in a sense reached without a contradictor. In the present application, the Applicant challenges the appropriateness of the conclusions reached in the Financial Circle Decision. The Applicant has sought to explain why, in his view, each of the Financial Circle loans was a good loan, and was not a problematic loan from an NCCP Act perspective, and how each borrower enjoyed value from the additional financial services and products they paid for, such that different conclusions ought be drawn.
In these circumstances, with respect to the Financial Circle Injunction and Financial Circle Decisions, the proper course for the Tribunal to adopt is: to accept the historical facts as found; with one exception, note the evaluations of those facts and conclusions drawn; consider the Applicant’s evidence which he relies on in support of the contention that each loan was a good loan and each borrower enjoyed value from the additional financial services and products they paid for; and then to form its own view as to conclusions that ought be reached in relation to the present review of the Credit Banning Order. In the present application, the Tribunal is not merely adopting the conclusions reached by O’Callaghan J and Moshinsky J, and is not determining the present application on the basis that a particular result follows from the mere fact that those conclusions were reached.
The one exception to not adopting the conclusions reached in the Financial Circle Injunction and Financial Circle Decisions concerns O’Callaghan J’s conclusion that:
… Financial Circle’s management ignored the Court’s concerns about the WRM business model as articulated in the judgment delivered at the time interlocutory injunctions were ordered against WRM and its associated entities, and set up a similar business regardless.[132]
[132]Financial Circle Decision, [171].
The timing of events and actions taken shows that this conclusion must be accepted.
The WRM Injunction and WRM Decisions have a different significance. The concerns referred to and the conclusions reached in the WRM Injunction Decision form part of the historical fact setting in which the Financial Circle business operations were developed and implemented. The sequence of events that led to Financial Circle starting its business operations includes ASIC making its allegations as to WRM’s wrongdoings in March 2017, and on 8 May 2017, obtaining interlocutory injunctions restraining WRM and its associated entities from carrying on a number of activities including offering cash payments (such as by way of rebate) in connection with other activities, and giving financial advice, because there was an appreciable risk of contraventions of the Corporations Act.[133] Thereupon WRM ceased business operations and those in control of it, together with the Applicant, set about devising modifications to the WRM business model that led to the Financial Circle business.[134] The WRM Injunction Decision conclusions communicated ASIC’s and the Federal Court’s concerns with the WRM business model to those who set up the Financial Circle business before they set it up. The WRM injunction decision was a public statement by Moshinsky J of the particular concerns with the WRM business that was made at a time before the Applicant and others formulated the Financial Circle business model. The particular concerns noted went materially beyond concerns as to inducements of a loan to potential clients who needed a loan, and then not providing a loan but providing a cash rebate. The concerns went to the quality and appropriateness of the advice that was being given to the clients and the duties of WRM and its related parties in giving that advice. This decision is important in the context of the present application in light of the Applicant’s evidence that he, with others, responsible for formulating the Financial Circle business model absorbed what Moshinsky J said, and addressed the problem of there not being a loan in the WRM business model, and kept the remaining features of the WRM business model that were, in his view, its good features. This assessment needs to be considered in forming a view as to whether the threshold conditions for a Credit Banning Order are satisfied.
[133]WRM Injunction Decision at [9], [58], [67]; Financial Circle Injunction Decision at [18] and [19]; and Financial Circle Decision at [11].
[134]Financial Circle Injunction Decision at [19] to [25].
The WRM Decision postdates all of Financial Circle’s business activities which ended in December 2017, however the Applicant was aware of it and had read it before he gave his evidence in the present hearing. The decision is significant because it provides an insight into the Applicant’s understanding of acceptable and unacceptable practices in an NCCP Act context. In the WRM Decision Moshinsky J, again, made adverse findings concerning a range of features of the WRM business model. And those adverse findings extended materially beyond any problem associated with, and limited to, inducing clients with an appearance of the availability of a loan when loans were not available with the only money available to be passed on to clients being insurance commission rebates. The Applicant’s present explanations of his understanding of the significance of that decision, and his present assertion that the decision revealed the problem with the WRM business model was that it gave the appearance that loans were available when they were not, similarly need to be considered in forming a view as to whether the threshold conditions for a Credit Banning Order are satisfied.
The Applicant’s explanation of the problems associated with the WRM business, after having the benefit of reading the conclusions reached in the WRM Injunction Decision and the WRM Decision as extracted above, is telling in relation to the question of the Applicant’s insights into the NCCP Act obligations associated with lending money imposed on licensees under that Act.
Accordingly the facts asserted or recorded in the WRM Decisions and the conclusions reached form part of the matrix of factual material that is relevant for present purposes, not the content of what was said or conclusions reached, rather for the fact that those conclusions were reached, that the Applicant was aware of the WRM Injunction Decision when setting up the Financial Circle business, and is aware of both decisions in his current and continued defence of the Financial Circle business model.
Impact of the Financial Services Banning Order
Notwithstanding the Financial Services Banning Order now being unchallenged and effective, it remains part of the context for the present matter. It does not follow that just because the Federal Court did not address whether the conduct sanctioned for breaches of Corporations Act obligations was also problematic from an NCCP Act perspective, that that conduct is not problematic in the NCCP Act context as well. This is particularly the case where financial services criticisms related to the fairness with which clients were treated, and the manner in which people, said to be vulnerable, were induced by the offer of something needed (a loan of money) and drawn in to commit to purchasing other financial services and products which they were not seeking when drawn to WRM and Financial Circle, at high prices. Nor does it follow that conduct that is proscribed by the Corporations Act is not conduct that could be problematic from a NCCP Act perspective. There are very clear overlaps in the two regulatory regimes. It is necessary to consider Financial Circle’s conduct, the Applicant’s involvement in it and his responses to criticisms of it, from a NCCP Act perspective, which has notable overlaps with financial services regulation. This is particularly the case where the Credit Banning Order can be, and has been, based on broader tests than mere appropriateness of the licence held for the activities undertaken.
The Financial Services Banning Order stands on a different footing to the Court decisions. The fact of the Financial Services Banning Order is a matter to which the Tribunal must have regard in forming a view as to whether there is reason to believe that the Applicant is not a fit and proper person to be involved in credit activities,[135] which is one of the conditions upon which a Credit Banning Order may be made.[136] Accordingly the fact of the Financial Services Banning Order must be taken into account by the Tribunal. What remains to be considered is the weight to attach to the fact of the Financial Services Banning Order and the facts and circumstances underlying the Financial Services Banning Order which led to its making. Here, the Financial Services Banning Order was based on a series of facts concerning the provision of financial services intimately connected with, and as a pre-condition to, making loans. Moreover, the problematic financial services were the only aspects of the Financial Circle business model that generated material amounts of money for Financial Circle, approximately $412,284 in aggregate on average approximately $8,084 per loan compared with the $400 application/establishment fee monthly account keeping fees of $5 and fortnightly direct debit fees of 60 cents in respect of each loan, with all interest paid on the loans on-paid to the funding providers. Financial Circle did not make any profits from the interest paid on the loans it made. In those circumstances the Financial Circle business model is not unfairly described as one that drew upon people who had an urgent need for modest amounts of money who could not raise it elsewhere, in order to make money from their superannuation fund balances for financial services that they did not seek out, and possibly did not need. In those circumstances it is appropriate to have regard to the facts and circumstances associated with the Financial Services Banning Order for two purposes: first, in forming a view as to whether there is reason to believe the Applicant is not a fit and proper person to be engaged in credit activities, one of the threshold conditions following which a banning order can be made, and second, if a banning order can be made based on that threshold condition, the scope and duration of the appropriate banning order that ought be made.
[135]Under NCCP Act, s 37B.
[136]NCCP Act, s 80(1)(f).
Contrary to the Applicant’s contentions, the fact of the Financial Services Banning Order and the circumstances and facts upon which it was made cannot be set aside, and the present matter is not simply a matter concerning the inappropriate license that Financial Circle held. It is therefore necessary to have regard to the totality of the Financial Circle business and not just the credit activities.
The Financial Circle business
The loan feature of the Financial Circle business, which notably did not produce any material amounts of income for Financial Circle, can be likened to an inducement, or metaphorically speaking a carrot, held out to a person with an urgent need for a modest amount of money, and held out while all of the conditions that would need to be satisfied before the modest amount of money would be provided by way of loan were only revealed later in the process. And that inducement (loan) was not released to the person who needed that modest amount of money until financial advice, superannuation fund and life insurance arrangements were entered into which provided Financial Circle’s substantive remuneration, sourced directly from the borrowers’ superannuation funds (in the case of the financial advice fees) and insurance commissions that only arose as a consequence of insurance premiums being paid from those superannuation funds. As noted above, Financial Circle offered loans of between $2,000 and $5,000, had 51 clients and derived $412,284 in revenue – an average of $8,084 per client. Adopting the mid-point between $2,000 and $5,000 of $3,500 as the average loan amount, Financial Circle’s average earnings per loan having their ultimate source in payments from the client’s superannuation fund, was approximately 231 per cent of that adopted average loan amount.
While the Applicant believes that the clients obtained financial advice and insurance in addition to the loans, and that the benefits of these products and services have not been taken into account, and the Tribunal accepts that he is genuine in holding those beliefs and in believing that these products and services were valuable, the Tribunal’s view is that those beliefs are out of step with how those products and services should be viewed. The products and services were required to be purchased before loans were made; and they were expensive and/or premium products that the borrowers could not afford other than by making payments from superannuation funds, in some cases involving very material proportions of their superannuation fund balances. Possibly the worst features of these expensive and premium products and services were first, that they were imposed as a requirement in a setting where the inducement of a much needed modest loan was held out to people in need, and second, they provided substantively all of Financial Circle’s revenue. Further, there is no evidence that Financial Circle’s clients were seeking these products and services when drawn to Financial Circle (and the Applicant accepts that they were not), or that, having regard to their circumstances at the time, had a relative need or desire for all of these products and services. Further, as found by O’Callaghan J, the requirement to accept financial advice and take out new insurance was not disclosed on the Financial Circle website which noted that there were no requirements, features or fees other than those appearing on the website.[137]
[137]Financial Circle Decision, [75].

That behaviour is behaviour that first targets, and then exploits vulnerable people. The Tribunal having formed its own view on the historical facts, and having heard the contrary case from the Applicant, that was not put to the Court in hearings leading to the Financial Circle Injunction Decision and the Financial Circle Decision, and having considered that contrary case, shares the same conclusions as to how those historical facts should be evaluated as have been reached by the Courts. These behaviours do not meet the standards reflected in the principles concerning efficient, honest and fair engagement in credit activities outlined above. Financial Circle’s behaviour constituted an egregious breach of minimum standards required by the NCCP Act exploiting vulnerable consumers.
The Tribunal accepts that a loan at six per cent per annum was an attractive proposition compared to the maximum allowable under the credit legislation.[138] However, it is not possible to consider the loans Financial Circle made in isolation as clients could only access the loans offered if they obtained advice and acted on it as recommended by Financial Circle – this resulted in significant charges to the client through their superannuation funds. In those circumstances, no reasonable person would regard the loan as good value. The Tribunal assumes that clients only agreed because they were desperate for money to meet short-term needs. That type of need for money makes the packaging of the loan with the insurance and financial advice and the reduction of superannuation balances all the more serious and egregious.
[138]Under the National Credit Code in Schedule 1 to the NCCP Act, s 32A.
The Tribunal accepts that there were benefits to clients of Financial Circle in obtaining a loan at six per cent per annum. However, the coupling with mandatory purchase of other services at a high price, and products of a premium nature and price, makes the lending arrangement problematic. The Tribunal also takes the view that:
(a)the advice relating to switching superannuation was to enable borrowers to pay a fee to Financial Circle for its services; and
(b)the recommendations relating to insurance were a case of egregious over-selling – providing a premium product at a premium price that the client was obliged to acquire,
without both of which, loans would not have been made and which generated income for Financial Circle.
Did Financial Circle contravene the NCCP Act?
Financial Circle contravened s 29 of the NCCP Act by entering into credit contracts as the provider of credit, without a licence authorising it to engage in that activity between September and December 2017. Both Moshinsky J and O’Callaghan J observed that Financial Circle was a lender. The documentation reflects that, as does and the web based marketing.
The Tribunal accepts that there was a contravention of s 29 of the NCCP Act by Financial Circle and considers below whether the Applicant was involved in that contravention.
Another contravention that is apparent is contravention of s 47 of the NCCP Act which required licensees to conduct their operations honestly, efficiently and fairly. This breach has not been advanced by ASIC, and in the circumstances the Tribunal does not rely on it, but does note it.
Should a Credit Banning Order be made?
As noted above ASIC contends there are four bases upon which a banning order may be made, namely :
(a)s 80(1)(d), that the Applicant had been involved in a contravention of the NCCP Act;
(b)s 80(1)(e), that ASIC had reason to believe that the Applicant was likely to contravene or be involved in a contravention of credit legislation;[139]
(c)s 80(1)(f), that ASIC had reason to believe that the Applicant was not a fit and proper person to engage in any credit activities; and
(d)s 80(1)(fa), the ASIC had reason to believe that the Applicant was not adequately trained or was not competent to engage in credit activities.
[139]The term credit legislation is defined in the NCCP Act, s 5 to mean:
(a) the NCCP Act; and
(b) the NCCP (Transitional) Act; and
(c) Division 2 of Part 2 of the ASIC Act and regulations made for the purpose of that Division (dealing with ‘Unconscionable conduct and consumer protection in relation to financial services’; and
(d) any other Commonwealth, State or Territory legislation that covers conduct relating to credit activities (whether or not it also covers other conduct), but only in so far as it covers conduct relating to credit activities.
Was the Applicant involved in a contravention of the NCCP Act? – s 80(1)(d)
The Applicant was involved in setting up Financial Circle and formulating the structure of the activities it undertook to make loans to its clients. Applying the test as to the reach of paragraph (c) of the definition of involved in a contravention referred to above[140] from the WRM Decision, no other conclusion is open other than that the Applicant was involved in the contravention: he knew that Financial Circle was named as lender and that the funds were paid from the Financial Circle bank account to the lenders. It is not necessary to show that he knew that this amounted to a contravention. This would be sufficient to allow ASIC to impose a ban of some description under s 80, but ASIC also relied on other grounds in s 80.
Is there a reason to believe the Applicant is likely to contravene or be involved in a contravention of the credit legislation? – s 80(1)(e)
[140]See para [6] above.
ASIC considered that based on the findings regarding the Applicant’s involvement in Financial Circle’s misconduct and the Applicant’s failings as a director and Responsible Manager to identify and prevent Financial Circle’s misconduct, that the Applicant is likely to contravene credit legislation in the future. The delegate’s original decision noted that this was:
either because he doesn’t have the knowledge and skill to ensure compliance, or he doesn’t have a compliance mentality.[141]
[141]ASIC Banning Order Decision dated 7 August 2019.
The references to compliance and compliance mentality do not really align with the Applicant’s conduct. Although there were certainly findings about compliance failures in Financial Circle’s business, e.g. failing to act in clients’ best interests, the major problem was that Financial Circle’s business model was exploitative.
While much of Financial Circle’s wrongdoing that was the focus of attention in the Financial Circle Decision related to breaches of the financial services provisions of the Corporations Act, rather than the NCCP Act, and the contravention relating to providing credit without an appropriate licence is unlikely to recur, the NCCP Act imposes obligations on licensees to ensure that credit services are provided efficiently, honestly and fairly.[142]
[142]NCCP Act, s 47(1)(a).
The Applicant does not see the problems with either the WRM or Financial Circle business models as noted in the extracts of his evidence above which suggests that the Applicant lacks awareness of the nature of the wrongdoing by Financial Circle. Given the lack of insight that the Applicant displays in relation to the wrongdoing by Financial Circle, the Tribunal concludes that there is reason to believe that given the opportunity he would be involved in a contravention of the credit legislation, even if unwittingly.
Is there reason to believe that the Applicant is not a fit and proper person? – s 80(1)(f)
The Tribunal notes that the fit and proper person test is concerned with competence and integrity. Although the Applicant does not present as dishonest, his lack of awareness of the wrongdoing of Financial Circle is problematic and ultimately, in our view pivotal in informing the appropriate disposition of this application.
In forming a view about whether the Applicant was a fit and proper person, the Tribunal has had regard to his knowledge of and involvement in WRM, a company that had been subject to proceedings in the Federal Court. That involvement demonstrates three matters: the Applicant’s knowledge of the business model of WRM; the transfer of most aspects of that model to Financial Circle and, critically, the Applicant’s lack of insight into the problems of that business model.
Having regard to the role of the Applicant in Financial Circle and the matters relating to his knowledge of and involvement in WRM, as well as his lack of insight into the wrongdoing by WRM as found by the Federal Court and by Financial Circle as noted above, the Tribunal agrees that the Applicant does not meet the knowledge, skills and judgment elements of the fit and proper person test and, as a consequence, has reason to believe that he is not a fit and proper person to engage in credit activities such as those offered by Financial Circle.
Is there reason to believe that the Applicant is not adequately trained or competent? s 80(1)(fa)
The Tribunal is not persuaded that the addition of the s 80(1)(fa) ground would be of significance given that other grounds for making the banning order were made out. In particular, issues of training and competence seem to overlap with the knowledge, skill and competence elements of the fit and proper person test. Any finding as to the application of this additional ground, in the present circumstances, does not add to the ss 80(1)(e) and (f) grounds. The Tribunal does note that the problem relating to the Applicant does not appear to be one of training, but rather an inability to understand the nature of the wrongdoing.
Scope and duration of the ban
The second issue the Tribunal needs to consider, having determined that a credit ban was appropriate, is the scope and duration of the ban. This raises two questions:
(a)should the Applicant be subject to a total ban or be banned from certain activities?
(b)should the ban be of a limited duration or permanent?
Section 81 of the NCCP Act contemplates that a banning order may be total or specific i.e. it may prohibit engaging in all credit activities or in specified credit activities, and may be permanent in duration or for a specified period.
A banning order is an administrative penalty. In the Kippe decision[143] the Full Federal Court held that a banning order is protective rather than punitive:
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 preventive in that it removes a perceived threat to the public interest and to public confidence in the securities… industry by removing that person from participation therein.
[143]ASIC v Kippe [1996] FCA 517, Von Doussa, Cooper and Tamberlin JJ.
As noted above,[144] the EM to the NCCP Bill also noted that banning orders were intended to protect the public, rather than being an order to punish or impose a penalty, although it recognised that this will usually be a necessary consequence.[145]
[144]See para [12] above.
[145]Explanatory Memorandum to the NCCP Bill, [259].
ASIC has published guidance on the making of banning orders in Regulatory Guide RG 218: Licensing: Administrative action against persons engaging in credit activities. The RG notes that ASIC does not believe it is appropriate to make a limited or permissive banning order:
Limited and permissive banning orders
218.36 We have the power to impose both limited and permissive banning orders. That is, we may impose a banning order:
(a) that applies only in specified circumstances or capacities (limited banning order): s81(1); or
(b) that generally prohibits a person from engaging in credit activities, but also includes a provision allowing the person to do specified acts, in specified circumstances, that the order would otherwise prohibit them from doing (permissive banning order): s81(3).
Nevertheless, we consider that it is generally not appropriate to impose limited or permissive banning orders.
218.37 In considering whether to make a limited or permissive banning order, we will have regard to:
(a) the factors set out in Table 1, Section C;
(b) considerations of specific and general deterrence; and
(c) whether such an order is consistent with our priority of protecting consumers.
218.38 If we were to make a permissive banning order in a particular case, it would likely be subject to conditions that add to existing obligations under the credit legislation and that would address our concerns about the person in question. Conditions that we may consider imposing include:
(a) conditions requiring the person to undertake and successfully complete additional relevant education or training before being permitted to engage in credit activities; and
(b) conditions requiring additional monitoring, supervision or audit of the person by their credit licensee or by a suitably qualified external expert appointed by the licensee and approved by us.
218.39 We will not consider imposing conditions that impose any obligations on us. Nor will we consider making a permissive banning order unless a nominated credit licensee has agreed to appoint or continue to engage the person and to comply with any conditions applicable to the licensee under the order.
Table 2 of RG 218 sets out the factors that ASIC will take into account in making a banning order of a particular duration. In particular it sets out the types of conduct that will give rise to a ban for more than 10 years or a permanent ban as follows:
Banning for 10+ years and permanent banning
•Dishonesty and intent to defraud
•Continued, knowing and wilful contraventions of the law and disregard of legal obligations
•Causing a large financial loss or making a large financial gain
•Previous contraventions of the law
•Serious incompetence and irresponsibility
•A likelihood that the person will engage in similar contravening conduct in the future
•Significant adverse impact on consumer confidence.
ASIC supplied, at the request of the Tribunal, a list of 71 cases in the period 2015 to 2019 where a permanent ban had been applied. The Tribunal is satisfied that most of the cases where a permanent ban has been applied involve dishonesty. Although:
(a)it has not been alleged that the Applicant has acted dishonestly, and the Tribunal has formed the view that that Applicant is genuine in his beliefs as to the loans, and financial products and services that were provided to Financial Circle’s clients as noted above, and
(b)there is no apparent dishonesty on the Applicant’s part,
the Tribunal’s conclusions that Financial Circle’s business activities constituted egregious breaches of minimum standards required by both the NCCP Act and Corporations Act exploiting vulnerable consumers,[146] make the Applicant’s involvement in that business with his lack of insight into its flawed nature so troubling, that, except as set out below, he should be banned from being engaged in providing any credit activities permanently.
[146]See [75] to [79] above, particularly [77]. These conclusions are consistent with those of O’Callaghan J in the Financial Circle Decision, for example at [7] where his Honour found that Financial Circle had failed to ensure it provided financial services efficiently, honestly and fairly.
The Applicant presented as a rather innocent if not naïve person. He was neither the mastermind nor architect of the Financial Circle business model. It is possible that his nature led him to assume the role acting as the face of Financial Circle’s business. The Tribunal has formed the view that in those circumstances, and based on the Applicant’s previous, apparently unblemished, employment history, he should be permitted to seek and obtain employment with an APRA[147]-authorised Approved Deposit-taking Institution assisting borrowers obtain loans, independently of any financial services. The NCCP Act contemplates a graduated scale of types of banning order that can be tailored to suit particular circumstances. Not embracing what is clearly contemplated by the legislature in the exercise of discretionary powers, by not addressing the particular circumstances of the case, is inappropriate. In the Tribunal’s view, the protective objectives of the scheme of s 80 banning orders is achieved, and importantly not frustrated, by the exception allowed in this instance.
[147]Australian Prudential Regulatory Authority.
Absence of sanctions for others
The Applicant raised the absence of proceedings by ASIC against others involved in WRM and Financial Circle, and controllers of institutions the subject of comment in the Hayne Royal Commission, as matters the Tribunal should take into account.
Whether others, be they people involved in the WRM or Financial Circle businesses, or people involved in companies whose business behaviours received attention in the Hayne Royal Commission, have been the subject of attention from ASIC is not a matter with which the Tribunal can be concerned. The Tribunal’s role is to review the evidence and facts as they pertain to the Applicant’s circumstances, and come to a conclusion as to whether the permanent Credit Banning Order which has been made by ASIC is the correct or preferable decision to make. Matters concerning sanctions for others are matters for ASIC, and not the Tribunal.
Absence of client/borrower complaint
The Applicant also raised an absence of client complaints as a matter that the Tribunal should take into account.
Whether there has been a complaint, or a complete absence of complaints, from clients does not go to the heart of the issues in dispute. The facts concerning the Financial Circle business have been revealed to ASIC and ASIC has taken action in response. The Tribunal’s role now, is to review whether the orders ASIC made, which constitute the reviewable decision for the present purposes, are appropriate in the circumstances and no wider enquiry or examination is permitted.
An absence of complaint may in some circumstances throw light on the seriousness with which behaviours ought be taken, but in other circumstances could be a reflection of an absence of awareness of the ability to complain, or the fora to whom complaints might be made. Absence of complaint might also be a reflection of ignorance of the impact of the transactions entered, and the relative unfairness of the terms upon which the transactions have been entered – a circumstance, if true, profoundly justifying the need for legislation like the NCCP Act, which includes banning orders for parties engaging in offending conduct, and for ASIC’s role under that Act.
DECISION
The Tribunal sets aside the decision under review and, in lieu thereof, orders that the Applicant be prohibited under the NCCP Act from performing any function involved in the engaging in of credit activities permanently, other than as an employee of an APRA-authorised Approved Deposit-taking Institution, assisting borrowers obtain loans independently of any financial services.

I certify that the preceding one hundred and six (106) paragraphs are a true copy of the reasons for the decision herein of F D O'Loughlin QC, Deputy President, Professor A O'Connell, Senior Member

........[sgd]................................................................
Associate
Dated: 4 September 2020

Date(s) of hearing: 19, 20 May & 22 June 2020

Applicant: Self-represented

Counsel for the Respondent: Ms Julia Lucas

Date(s) of hearing:	19, 20 May & 22 June 2020
Applicant:	Self-represented
Counsel for the Respondent:	Ms Julia Lucas