ASIC bans former AFSL director

The corporate regulator has banned Exalt Funds' director, David Hodgson, from providing financial services for two years after an ASIC investigation found that he failed in his duty to ensure Exalt complied with its obligations as a Responsible Entity.

Exalt has held an Australian Financial Services Licence since September, 2011.

During the period March 2013 to July 2014, Exalt was found to have made misleading claims in Product Disclosure Statements, including that an investment in the Paladin Monetizer Fund (ARSN 153 294 083) was low risk when such statements were false.

Exalt also failed to keep proper financial records for the Paladin Monetizer Fund (ARSN 153 294 083) and failed to lodge a variety of documents with ASIC.

These included annual profit and loss statements and balance sheets for Exalt for the financial years ended 30 June 2013 and 30 June 2014; financial reports and director's report for Exalt and the Paladin Monetizer Fund for the financial years ended 30 June 2013 and 30 June 2014; and an audited compliance plan for the Paladin Monetizer Fund (ARSN 153 294 083) for the financial years ended 30 June 2013 and 30 June 2014.

Mr Hodgson initially did not register the Paladin Monetizer Fund (ARSN 153 294 083) and relied on a fundraising exemption under section 708 of the Corporations Act.

However, as the fundraising approached the limits of the exemption, he arranged for the investors in the unregistered scheme to be 'transitioned' into the registered Paladin Monetizer Fund. This transition was not effective and as a result, the Paladin Monetizer Fund (ARSN 153 294 083) has been unable to meet its compliance obligations with ASIC.

"Responsible Entities are entrusted with property that belongs to others and accordingly, are held to a high standard by ASIC," the regulator's commissioner, Greg Tanzer, said. "The directors of Responsible Entities must take their compliance obligations seriously or risk being removed from the financial services industry."

Following concerns raised by ASIC, the Paladin Monetizer Fund (unregistered) and the Paladin Monetizer Fund (ARSN 153 294 083) are no longer in operation.

Exalt has also requested its AFSL be cancelled.

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