ASIC commences proceedings against wholesale licensee

On Thursday, ASIC announced it had commenced civil penalty proceedings in the federal court against wholesale licensee, Lanterne Fund Services.

The regulator alleged multiple failures by Lanterne to meet the obligations of its AFS licence including a failure to meet organisational competence requirements.

It also alleged that Lanterne failed to have adequate risk management systems and resources, including financial, technological and human resources, to carry out its supervisory arrangements under a “licensee for hire” business model.

Lanterne operates a business in which its authorised representatives provide advice and other financial services to wholesale customers under its AFSL.

The firm has over 200 authorised representatives and over 60 corporate authorised representatives operating under its licence.

“ASIC is concerned that for an extended period, there was a real risk of investor harm due to shortcomings in Lanterne’s systems and processes,” said ASIC deputy chair Sarah Court.

“Despite Lanterne’s authorised representatives operating under its licence being responsible for over $1 billion in funds and collectively paying monthly fees of around $180,000 to Lanterne during this period, it appears to ASIC that Lanterne operated a wholly deficient business, with no compliance staff and almost no risk management processes in place.”

Among ASIC’s other allegations are that Lantene failed to ensure that its representatives were adequately trained, to take steps to ensure that its representatives complied with the financial services laws and to do all things necessary to ensure that financial services were provided efficiently, honestly and fairly.

“ASIC expects all wholesale licensees to reduce risk by ensuring their businesses develop, implement and maintain robust risk and compliance procedures,” Ms Court said.

“As today's action demonstrates, when ASIC sees a business it considers to have deficient risk management processes, we will look to take action.”

The corporate regulator is seeking declarations and pecuniary penalties from the court.

It is also seeking orders that an independent expert be appointed to review and report on Lanterne’s systems, processes and controls, and that the firm then implement a risk management and compliance program once the report is received.

A date for the first case management hearing has yet to be scheduled.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.