ASIC has clamped down on an unregistered mortgage investment scheme (MIS) to prevent further investors losing more than the $10.3 million the regulator believes is already owing.
The corporate watchdog obtained orders in the Supreme Court of Australia against Jonathan Peter West of Athelstone, South Australia, and John West & Associates (JWA).
ASIC alleged West and the company have been operating a MIS in breach of the Corporations Act since May 21, 2003.
The regulator obtained orders to wind up the scheme on September 18, 2007. JWA was then placed into liquidation.
According to court documents, Justice Gray said the defendants engaged in serious and repeated breaches of provisions of the Corporations Act in the conduct of the mortgage investment business.
"The scheme involved high risks, the extent of which was not disclosed in any proper way to investors. No proper books and records were kept by Mr West and JWA," Gray said.
ASIC had alleged that West and/or JWA borrowed funds from more than 60 South Australian investors offering interest rates of up to 3 per cent per month.
The funds were on-lent to borrowers for commercial purposes. ASIC is concerned that the majority of these loans are in default and investors are owed over $10.3 million.
The regulator also alleged that the security provided by borrowers for investors' funds advanced to them was often inadequate and, in the case of over $1.19 million, no security was provided.
"ASIC's action was aimed at preventing a further loss of funds by investors in what was an uncommercial and illegal scheme with little or no chance of success," ASIC enforcement executive director Jan Redfern said.
"Investors should always check that the scheme they are investing in has been registered with ASIC. If it hasn't, walk away."
