ASIC insists it is in the interest of Sterling Group investors to lodge complaints with AFCA

Maria Nikolova

ASIC’s bit of advice is in the face of AFCA’s statement that it  will put a pause on processing complaints against insolvent firms.

The Australian Securities and Investments Commission (ASIC) has provided an update regarding its action in the Federal Court of Australia against the Responsible Entity of the Sterling Income Trust, Theta Asset Management Ltd and its managing director, Mr. Robert Patrick Marie. ASIC also noted a couple of recent announcements from the Australian Financial Complaints Authority (AFCA) relevant to this matter.

In regard to ASIC’s action in the Federal Court, the Court has advised that, due to COVID-19, the Case Management Hearing listed for May 6, 2020 will now be determined having regard to the written submissions and documents filed by the parties, rather than by hearing oral submissions by the parties.

ASIC will provide a further update on the outcome of the hearing, which will be procedural in nature, after 6 May 2020.

The regulator also refers Sterling investors to two recent AFCA Media Releases. The first concerns the recent withdrawal of a number of Sterling complaints; and the potential for these withdrawals to hamper complainants’ potential access to any compensation scheme of last resort that is ultimately able to be established by the Federal Government (Compensation Scheme of Last Resort).

The second announcement by AFCA is dated April 14, 2020 and concerns complaints relating to insolvent companies (such as Theta and most of the companies within the Sterling Group of Companies, including the Silverlink entities) and a Compensation Scheme of Last Resort being considered by the Federal Government.

AFCA says it is unclear what the impact of the Covid-19 pandemic will be on the establishment of a compensation scheme of last resort.

Until there is certainty provided about the scope and timing of the Compensation Scheme, AFCA has reviewed and put in place appropriate arrangements for dealing with any complaints it receives against insolvent financial firms. AFCA will put a pause on processing complaints against insolvent firms, this includes existing and new complaints. AFCA will accept future complaints about insolvent financial firms, but we will hold them over until there is more clarity about the Compensation Scheme, and the parameters of the scheme.

“Taking into account this latest advice from AFCA, ASIC remains of the view that it is in the interests of investors in the Sterling Group of Companies to continue to lodge and maintain complaints with AFCA, as it is only by doing so that such investors could be considered for compensation under any potential future Compensation Scheme of Last Resort that is ultimately able to be established”, the regulator says.

In September 2017, the Australian Securities & Investments Commission (ASIC) announced it had made stop orders on Product Disclosure Statements issued by Theta Asset Management Ltd (Theta) for the Sterling Income Trust (SIT). In June 2019 most of the companies in the Sterling group entered into liquidation. AFCA has received complaints about the SIT against two financial firms that are AFCA members. Those financial firms have been involved in the operation, management and promotion of the SIT and some other Sterling Group investments.

Theta, which is the Responsible Entity for the SIT, has entered into administration. On December 13, 2019, Christopher Darin and Mervyn Kitay of Worrells Solvency & Forensic Accounting were appointed as administrators of Theta.

In January 2020, ASIC advised that the Australian Financial Services Licence (AFSL) of Theta has been suspended until July 21, 2020 because it is under external administration.

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