ASIC had the tools but was totally outfoxed

Mike Taylor

Managing Editor and Publisher

18 November 2021

The Australian Securities and Investments Commission (ASIC) had the tools to deal with the Sterling Investment Trust managed investment scheme (MIS) but failed to use them, according to a Queensland barrister who is a former ASIC executive.

In a submission to the Senate Economics Committee inquiry into the collapse of Sterling and in evidence given to the committee this week, Niall Coburn said the regulatory tools available to ASIC including obtaining an urgent injunction in the Federal Court of Australia or placing a permanent ban on any of the products until ASIC fully collected all of the information.

“The ASIC inaction failed to protect the Sterling investors and ASIC had a number of tools in its armoury that it could have used:

• There was evidence of risks to investors.
• There is no evidence that ASIC obtained internal or external legal advice
• Obtain an injunction in the Federal Court;
• Freeze funds until commenced an investigation.
• Appoint an expert to review the compliance -solvency of sterling and report to ASIC.”

“In urgent situations in the past, ASIC has closed down complex registered managed investment schemes in a week or at lightning speed. Such schemes include Equititrust, British Marine Bank and more recently Mayfair Group where ASIC [acted] in a more reasonable time frame,” Coburn claimed.

“The regulator already had intelligence from 2015/2016 and when the referral came in from WA DMIRS it could have acted urgently or formed a joint task force with the State regulator,” he said.

“Taking a year to commence an investigation when vulnerable people are involved is inexcusable and not the competent actions of a regulator especially when vulnerable people are involved. Even placing a stop order on one Sterling Entity, then allowing another entity in a small corporate group to continue to raise funds reveals a regulator that did not have a handle on the enforcement of Sterling allowing a bad situation to become worse,” Coburn said.

“What has transpired, is that ASIC was totally “outfoxed” by the directors of the Sterling First group and its associates, who, after being stopped in relation to one PDS in October 2017 simply restructured the same product and continued the marketing to elderly individuals.”