Judge Derrington of the Federal Court in Queensland has accepted ASIC’s prima facie case that Linchpin Capital and its unlicensed fund, Endeavour, have breached the Corporations Act and should be placed into receivership.
The judgement follows court orders made on 29 July that restricted Linchpin from “promoting or carrying on any financial services business in Australia”, “providing financial services advice” and “dealing in [and] promoting financial products”.
An affidavit tabled in the court case by ASIC solicitor Anne Gubbins revealed that the unregistered fund linked to Endeavour was used to make loans to Linchpin advisers for the purpose of buying client books. Personal loans were also made to the directors of Linchpin, the ASIC affidavit alleged.
Linchpin director Peter Daly continues to maintain that the operations of the group’s dealer groups v Beacon, Libertas and Risk and Investment Advisers Australia (RIAA) – will be unaffected as result of the court orders.
In his judgement handed down yesterday, Judge Derrington said ASIC’s allegations of misleading or deceptive conduct “appear to have been established [on the evidence] and the defendants did not contend to the contrary”.
“The unauthorised issuing of interests in the Unregistered Fund is a serious matter and a substantive contravention of the act,” said the judgement.
“The manner in which the Unregistered Fund has been operated is also a matter of some concern given that the bulk of its funds have been invested in related party loans with no registered security.
“The investment of the funds in that manner does not appear to be in accordance with the Information Memorandum and the circumstances indicate that this is likely to have given rise to breaches of trust and fiduciary duty,” said the judgement.
“For the reasons given the orders sought by ASIC, with appropriate alterations, should be granted.”
In a statement to InvestorDaily, Mr Daly of Linchpin noted the following section of the judgement: “For the purpose of attaining the objectives for which the receivers are appointed, the receivers’ powers do not extend to dealing with the first defendant’s shares in the first defendant’s subsidiaries or exercising shareholder powers in relation to those subsidiaries.”
Mr Daly said the court’s findings are based on “preliminary evidence" and he added that “the facts are yet to be fully tested in court”.
The case continues.
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