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Former director & In-house lawyer banned for breaches of Financial Services Laws

Editorial Staff

A former director and in-house counsel of Australia's Provident Capital Limited, promoters of the Provident Capital Monthly Income Fund, a defunct investment company, is the latest to be subject to sanctions arising out of the collapse of the company.

In a month's time, it will be four years since receivers were appointed to Provident Capital Monthly Investment Fund which, according to the receivers PPB Advisory, " is a funds management and investment group offering fixed interest investments and mortgage lending products. These investments are secured against a portfolio of non-conforming mortgages secured over Australian residential and commercial property. The business has some 3,500 debenture holders who have invested in Provident Capital’s debenture product. "

"non-conforming" loans are bad and doubtful debt: in short, the fund bought up mortgages that were already delinquent, either to repossess the mortgaged property and realise the asset value or to try to manage the loans back into order.

Debentures were sold.

The debenture holders pushed for receivership when it was clear that the asset values would not cover payments due to them.

Since then, ASIC, as the sector's regulator, has been investigating and there has been a succession of actions.

In July 2015, John Seymour, a former director, was banned from managing a company for three years and from providing financial services for the same period. He as a director from May 1998 to November 2013, more than a year after the company went into liquidation.

ASIC's findings said "Seymour breached his obligations as a director of Provident Capital and engaged in conduct that was misleading or deceptive in relation to financial products by approving a number of documents issued by Provident Capital, namely:

- 15 Quarterly and 7 Benchmark Reports issued to ASIC and Australian Executor Trustees Limited, which contained misleading statements and which were misleading or deceptive, and
- a Debenture Prospectus in December 2010, issued to raise funds from the public, which contained misleading statements and which were misleading or deceptive; and
- Information Booklets in 2012, which were deficient."

In February 2015, ASIC banned Michael Roger O'Sullivan from managing corporations for five years and from providing financial advice for seven years. He was managing director of Provident Capital from May 1998 to January 2014.

ASIC found that O'Sullivan

- failed to exercise due care and diligence in the management and recording of the largest loan made by Provident Capital through its Fixed Term Investment Portfolio
- caused Provident Capital to make misleading statements to ASIC and Australian Executor Trustees Limited
- caused Provident Capital to issue a Debenture Prospectus in December 2010 to raise funds from the public which contained misleading statements, and
- used his position improperly to gain financial advantages for himself and for a company of which he was formerly a director."

ASIC ordered the maximum period of ban for O'Sullivan.

O'Sullivan appealed. At a hearing on 17 November 2015, the tribunal reserved its decision. It appears that it has not yet been made public.



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