ASIC has banned Mr Michael Roger O’Sullivan of Sydney from managing corporations for five years and from providing financial services for seven years. The ban follows an ASIC investigation which found Mr O’Sullivan breached his duties as a director and failed to comply with financial services laws.
Mr O’Sullivan was the managing director of Provident Capital Limited (Provident Capital) from 25 May 1998 to 28 January 2014. Provident Capital went into receivership on 3 July 2012 and into liquidation on 24 October 2012.
ASIC suspended Provident Capital’s Australian financial services licence on 15 October 2012.
ASIC’s investigation found Mr O’Sullivan:
- failed to exercise due care and diligence in the management and recording of the largest loan made by Provident Capital through its Fixed Term Investment Portfolio
- caused Provident Capital to make misleading statements to ASIC and Australian Executor Trustees Limited
- caused Provident Capital to issue a Debenture Prospectus in December 2010 to raise funds from the public which contained misleading statements, and
- used his position improperly to gain financial advantages for himself and for a company of which he was formerly a director.
ASIC Commissioner John Price said, ‘Directors have a responsibility to ensure that statements made to investors are true and reliable. Failing to meet this simple obligation undermines confidence and trust in the corporate and financial services communities.’
‘Managing companies and providing financial services requires compliance with important obligations. ASIC will remove those who fail to meet these obligations,’ Mr Price said.
Mr O’Sullivan has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.
ASIC’s investigation is continuing.
Background
The five year period for which Mr O’Sullivan was banned from managing corporations is the maximum period of disqualification that ASIC can impose under section 206F of the Corporations Act 2001.
Provident Capital issued debentures to retail investors through their Fixed Term Investment Portfolio and advanced the debenture funds to third party borrowers, including property developers, on a first mortgage basis.
Provident Capital also operated a mortgage fund under a wholesale facility with Bendigo and Adelaide Bank and two managed investment schemes.
On 29 June 2012, on an application by the Australian Executor Trustees Limited, the trustee for Provident debenture holders, the Court ordered that receivers be appointed to Provident. ASIC appeared as a ‘friend of the court’ in these proceedings.
When Provident Capital went into liquidation on 24 October 2012 over 3,000 Provident debenture holders were owed approximately $130 million.
Provident’s receivers (PPB Advisory) have estimated that the likely return to debenture holders will be in the range of $0.17 to $0.19 in the dollar.
