The corporate regulator has warned firms need to do the right thing by their investors after companies in the Mayfair 101 Group were found to have made statements that were false, misleading or deceptive in advertisements for its debenture products.
A statement by the Australian Securities and Investments Commission (ASIC) said the Federal Court found Mayfair Wealth Partners Pty Ltd trading as Mayfair Platinum, Online Investments Pty Ltd trading as Mayfair 101, M101 Nominees Pty Ltd and M101 Holdings Pty Ltd, engaged in misleading or deceptive conduct, and made false or misleading representations.
Among the findings were Mayfair’s debenture products were represented to be comparable to, and of similar risk profile to, bank term deposits, when they exposed investors to significantly higher risk than bank term deposits.
It was also represented that the principal investment would be repaid in full on maturity, when investors might not receive capital repayments on maturity, or at all, as Mayfair could elect to extend the time for repayment for an indefinite period of time.
The Court also found Mayfair Platinum, Mayfair 101 and M101 Nominees engaged in misleading or deceptive conduct and made false or misleading representations by representing that the M Core Fixed Income Notes were fully secured financial products, when funds invested were:
- lent to a related party and not secured by first-ranking, unencumbered asset security or on a dollar-for-dollar basis or at all;
- used to pay deposits on properties prior to any security interest being registered; and
- used to purchase assets that were not secured by first-ranking, unencumbered asset security.
Justice Anderson also noted, in relation to the use of sponsored link internet advertising, that ‘”it is tolerably clear that the defendants’ marketing strategy was addressed to persons searching for a term deposit in order to divert them to the defendants’ websites.”
ASIC Deputy Chair Karen Chester said the corporate regulator’s success in court demonstrated firms need to do the right thing by their investors, even when they are wholesale investors.
Also read: ASIC Warns Investors Of Bond Scams
“They need to make sure they accurately describe their products when advertising,” she said.
“The Court has shown that Mayfair 101 engaged in misleading and deceptive conduct by claiming its products were comparable to bank term deposits, when they were not.
“Our ‘True to Label’ project that we commenced in late 2019 identified 30 funds with over $10 billion across these funds, that are misleading investors through online advertising, especially when investors are seeking yield in a low interest rate economy.
“The online advertising is misleading by claiming to offer products that involve less risk, when in reality, investors could lose some or all of their investments.
“Advertisements also claimed investors could get their invested money out when they wanted but that was not the case.
“This case is a warning that ASIC will not only take action where investments are marketed as safer, lower risk, or more liquid when they are not, but when search engines are used in a misleading or deceptive way to entice investors to products they are not searching for.”
ASIC’s full statement can be found here.
Mayfair 101 Response to ASIC
A statement by Mayfair in response to the courts’ judgement said the group chose not to contest the matter instead focusing its resources on restructuring efforts to minimise any further damage caused by proceedings brought by ASIC.
Group Managing Director James Mawhinney said: “We had a defensible case however it was not feasible to defend ourselves against an infinitely well-funded Government department.
“All our advertising was signed off by the Group’s lawyers and was deemed compliant within the Corporations Act.”
The statement said any ASIC penalties “will have the effect of diluting the returns available to Mayfair 101’s investors resulting from the envisaged restructure and asset realisation.”
The case follows separate ASIC action in December when it announced it had commenced civil penalty proceedings against La Trobe Financial Asset Management Ltd in its capacity as responsible entity for the La Trobe Australian Credit Fund.
ASIC alleged La Trobe, which is defending the action, marketed the fund in ways that were misleading or deceptive, citing customers that wished to withdraw funds from its 48 hour and 90 day accounts that were unable to do so within the time specified.
The corporate regulator has continued its crackdown on fixed income funds that are incorrectly labelled and thereby confusing to investors.
ASIC has conducted reviews in the funds management sector in 2020 to ensure that products are true to their labels and promotion.