ASIC Clamping Down on Unregulated Firms – Fraudulent Currency Trading Scheme Uncovered

Following an investigation into an unlicensed and fraudulent financial services business, ASIC has successfully applied to the Supreme Court of Queensland for three South-East Queensland based companies to be wound up.

ASIC alleged Secured Collateral Pty Ltd (Secured Collateral), Diversified Collateral Pty Ltd (Diversified Collateral), Intra Management Pty Ltd (Intra Management) and their respective sole directors, Dylan Robson, Keiron Michael Weertman, and Shane Rodney Hasell, operated an unlicensed and fraudulent financial services business that defrauded investors of approximately $1,000,000 between May and October 2012.

The Court ordered that

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• Secured Collateral, Diversified Collateral and Intra Management be wound up

• William Fletcher and Tracy Knight of Bentleys Corporate Recovery Pty Ltd be appointed as the liquidators of the companies

• The respondent companies and individuals pay ASIC’s legal costs

ASIC carried out an investigation into an entity called Secured Private Wealth. The regulator alleged that Secured Private Wealth used cold calling and a website to induce investors to deposit funds into the accounts of Secured Collateral, Diversified Collateral and Intra Management. Investors were promised that the funds would be used to invest in currency trading schemes, purchase shares or to make investments in index funds. Investors were promised that these schemes would generate returns well above that of others.

Victims of the fraud were subjected to high-pressure cold calls from employees of the companies purporting to survey their interest in investing generally, with employees adopting the names of legitimate companies who are licensed to provide financial services.

Furthermore, the scam was supported by sophisticated technology including a website offering trading signals and real-time information with regard to their trading.

Such high pressure calls and promises of high returns resulted in victims being induced to hand over their money, and subsequent to making a first deposit, they were called back by retention agents who persuaded them to invest in a more sophisticated trading strategy which required further investment.

Missappropriation of Funds

Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Magnates last year reported that, along with many other regulators worldwide, ASIC is looking at increasing capital adequacy requirements as well as the security of customer funds, which has also been a point of discussion among regulatory figures in other jursidictions such as the UK, where the FSA/FCA has a rule book containing strict Client Assets (CASS) procedures.

ASIC is a regulator which takes this very seriously and recently invested in First Derivatives’ Delta Stream system which conducts detailed surveillance relating to firms’ behavior, including the handling of Client Money Client Money Client money refers to the money or margin – which may be any currency in the form of cash, check, draft, or electronic transfer – that a firm receives or holds for a client. Money held by a firm in the form of a stakeholder, which is are not payable on demand or immediately due, also refers to client money. The definition of client money does not apply to money held by businesses that operate in its own name on behalf of a client. Although the client does have to be in agreement before this arr Client money refers to the money or margin – which may be any currency in the form of cash, check, draft, or electronic transfer – that a firm receives or holds for a client. Money held by a firm in the form of a stakeholder, which is are not payable on demand or immediately due, also refers to client money. The definition of client money does not apply to money held by businesses that operate in its own name on behalf of a client. Although the client does have to be in agreement before this arr Read this Term as demonstrated by last week’s enforceable undertaking from City Index being brought into being by the system uncovering irregularities in City Index’s handling of client funds.

With regard to this particular case, ASIC alleged that Weertman, Robson and Hasell withdrew the money from the company bank accounts in cash. The Court noted that each director must have been aware that they were involved in some form of "unlawful exercise". ASIC’s inquiries to date have not been able to substantiate that shares were purchased on behalf of investors.

ASIC Commissioner Greg Tanzer said ASIC took this action to ensure that an independent person could review the scheme.

‘While there are still funds not accounted for, today’s orders increase the likelihood that investors will see some of their investment funds returned to them. Unfortunately, with many schemes of this nature there are no returns’, Commissioner Tanzer said.

The Court declined to make declarations of contravention by the companies of carrying on a financial services business without an Australian financial services (AFS) licence or declarations that the directors were knowingly involved in such contraventions. The Court also declined to grant injunctions to prevent the companies or directors carrying on a financial services business, and from operating any internet websites promoting, advertising or offering financial services, without holding an AFS licence.

ASIC and Australian State and Territory police services continue to warn consumers to be alert to investment fraud having seen an increase in this activity over the last twelve months. ASIC’s tightening of regulations and continual surveillance ties in with this dynamic, the future results of which will be interesting.