WA Labor senator Louise Pratt questioned ASIC at a recent hearing of the parliamentary joint committee on financial services on the avenues of redress for victims of WA-based Theta Asset Management, which was placed into liquidation owing around $16 million to investors.
ASIC had instructed victims of Theta and the associated Sterling group of companies to lodge complaints with AFCA in anticipation of the scheme being established last year, after several investors in the group had been awarded penalties of more than $100,000 which they could not recover from the collapsed entities.
However, ASIC deputy chair Karen Chester said the ability for consumers to recover their penalties had been impacted by the COVID pandemic, which had pushed back the establishment of the scheme.
While consultation around the scheme had occurred early last year, Minister for Financial Services, Superannuation and the Digital Economy Jane Hume said late in 2020 legislation for the scheme – which provides compensation for victims of financial misconduct where the affected firm has collapsed – would not be finalised until some time in 2021.
“When we said people should put complaints to AFCA we did that in the case that everything was on track and unfortunately that turned out not to be the case,” Ms Chester said.
“They are happy to hear those complaints as soon as the compensation scheme of last resort is on track.”
ASIC commissioner Cathie Amour said submitting complaints against Theta was “still a worthwhile exercise” and that the regulator was investigating what further action could be taken against the troubled asset manager.
The regulator had been awarded penalties of $3 million against Theta and its director Robert Marie in the WA Federal Court, but had not sought to recover the fines so as not to further deplete the pool of funds available for the group’s creditors.
“We are encouraging victims who may not have done so to lodge complaints with AFCA – we realise there are issues that need to be resolved, but we think it’s a worthwhile exercise to do that,” Ms Armour said.
“We are continuing to look at this situation to see what there is that we should be doing. We are examining the past conduct and we’re not giving up on that. I think our view is that there is likely to be shortfalls and outcomes that aren’t desirable for the investors.”
The situation had been further complicated by a recent ruling against AFCA in the NSW Supreme Court, which found its rules did not provide jurisdiction to hear cases where a representative had acted outside the authority of their licensee.
The ombudsman said last month that the judgement could affect the ability of victims of Theta and the Sterling group, who were advised through Libertas Financial Planning to have their cases heard at AFCA.
“In light of the judgment, AFCA has reviewed its jurisdiction to consider the complaints lodged prior to 13 January 2021 against, among others, Libertas Financial Planning Pty Ltd,” AFCA said.
“AFCA is currently in communication with Libertas and the impacted complainants to provide an update on our review.”
Ms Armour said the regulator was looking at a possible “legislative fix” that could address cases lodged prior to AFCA’s rule change.
“We think it’s worthwhile to put in a complaint with AFCA even though it may not be able to be immediately acted upon by AFCA,” she said.
