Corporations Law

The fraud committed against the cestuis que trust (members of and beneficiaries) of the occupational pension trust established on the 23 December 1913 in the State of South Australia has involved three corporate Trustees who were or not not resident in South Australia as required by the provisions of the Trustee Act 1936(SA). Prior to 20 December 1982 the trust was administered by natural person trustees resident in the State of South Australia and the trust was administered prudently and lawfully. ASIC has jurisdiction over all companies including companies that are corporate Trustees pursuant to the ASIC Act 2001 and the Corporations Act 2001. ASIC has specific jurisdiction over companies that provide financial services. ASIC also has specific jurisdiction with respect to consumer protections associated with the provision of financial services.

General Conduct of the Directors of Companies

The common law places certain obligations on Directors who stand in a fiduciary relationship with their company. These common law obligations have been given statutory recognition in Sections 180-184 of the Corporations Act 2001, which also places obligation on “other officers” and employees of the company.  

Provision of Financial Services

Companies who provide financial services must hold an Australian Financial Services Licence (AFSL) and Section 912 A of the Corporations Act 2001 provides:

(1)  A financial services licensee  must:

(a)  do all things necessary to ensure that the financial services covered by the the licence are provided efficiently, honestly and fairly;

 

False and Misleading Representations

It is an offence pursuant to Section 12DB of the ASIC Act  2001 for a financial service provider to make False and Misleading Representations with respect to the provision of financial services.  

False and Misleading Conduct

Specific reference is made in Section 1041H of the Corporations Act 2001 with respect to the conduct of a Trustee of a superannuation trust and the beneficiaries of that trust. Subsection 1041 H(1)(vi) provides:

(1)  A person must not, in this jurisdiction, engage in conduct,  in relation to a financial product or service, that is misleading or deceptive or is likely to mislead or deceive.

(vi)  a trustee of a superannuation entity (within the meaning of the Superannuation Industry (Supervision) Act 1993 ) with dealing with a beneficiary of that entity as such a beneficiary;

 

Dishonest Conduct

Section 1014G of the Corporations Act 2001 provides:

(1)  A person must not, in the course of carrying on a financial services business in this jurisdiction, engage in dishonest conduct in relation to a financial product or financial service.

“dishonest” means:

(a)  dishonest according to the standards of ordinary people; and

(b)  known by the person to be dishonest according to the standards of ordinary people.

Where the maximum penalty is a fine and 10 years of imprisonment pursuant to Item 310 in Schedule 3 of the Corporations Act 2001.

Disclosure Obligations

The general law of trusts imposes disclosure obligations on the Trustees of the trust. More information on the disclosure obligations of trustees under the general law can be found here. In the case of trusts established in South Australia, Section 84B of the Trustee Act 1936(SA) makes statutory provision for the Trustees to produce certain prescribed “trust records“, including all the Deeds associated with the trust pursuant to Regulation 5 of  the Trustee Regulation 2011 SA). It is an offence to contravene Section 84B of the Trustee Act 1936 (SA). Because superannuation is COMPULSORY and the trustees of large superannuation trusts have direct control of very large amounts of “other people’s money“, the Parliament of Australia has made it and indictable offence for a “Responsible Person” of the trustee to wilfully conceal prescribed “trust documents” and “trust information” from a person with a beneficial interest in that superannuation trust. Subsection 1017C(5) of the Corporations Act 2001 requires a trustee to provide copies of “trust documents” prescribed by Regulation 7.9.45 of the Corporations Regulations 2001 ,”free-of-charge” {refer to Schedule 10A Part 11.1 of the Corporations Regulation 2001}. These include copies of all the documents that compose the set of document that determine the terms of the trust, otherwise known as the “governing rules” of the fund.

The maximum penalty for the contravention of subsection 1017C(5) of the Corporations Act 2001 is a fine and two years imprisonment pursuant to Item 296C   in Schedule 3 of the Corporations Act 2001.

The legal definition of the “governing rules” can be found here.

{Details of how ASIC “re-writes the law” and fabricates its own definition of “governing rules” can be found here}

Subsection 1017C(2) of the Corporations Act 2001  requires a trustee to provide copies of non-exempt “trust documents” other than those prescribed under subsection 1017C(5) to be provided subject to the payment of a “cost recovery” fee if so required by the Trustee.

The maximum penalty for the contravention of subsection 1917C(2) of the Corporations Act 2001 is a fine and two years imprisonment pursuant to Item 297B   in Schedule 3 of the Corporations Act 2001.

Subsection 1017C(4) prescribes “exempt documents“, that is the type of documents that are nor required to be disclosed to a person with a beneficial interest in the superannuation trust.

Obligation of Auditors

Auditors of superannuation funds and the corporate Trustees of these funds are subject to obligations to report “significant contraventions” of the Corporations Act 2001  to ASIC pursuant to section 311,  and 990K of the Corporations Act 2001. The Auditors of superannuation funds also have reporting obligations of suspected contraventions of certain provisions of the Corporations Act 2001 pursuant Section 129 the Superannuation Industry (Supervision) Act 1993.