ASIC’s Chair receives over 100 letters regarding Sterling Group in last two weeks

Maria Nikolova

ASIC says it is not able to directly make funds available for the compensation of investors who have suffered loss.

Following the publication of information regarding the investigation undertaken by the Australian Securities & Investments Commission (ASIC) into Sterling Group in June this year, the regulator has provided an update on the matter.

ASIC says it has received more than 100 letters addressed to ASIC Chair James Shipton over the past two weeks. Many of the letters refer to a demand from Ms Denise Brailey to the ASIC Chair to make a fund of $26 million available to compensate those who have suffered loss as a result of investments promoted by the Sterling group of companies.

Unfortunately, ASIC is unable to assist in the manner requested. The regulator notes that it is not able to directly make funds available for the compensation of investors who have suffered loss.

ASIC, however, stresses that it has taken significant action with a view to protecting investors. For example, since ASIC’s involvement:

  • the promotion of units in the Sterling Income Trust under the original Product Disclosure Statement has been prohibited;
  • Theta Asset Management Ltd has taken action to wind up the Sterling Income Trust;
  • the directors of the Sterling group of companies have resolved to appoint voluntary administers to the companies. With creditors voting in favour of most of the companies (other than Rental Management Australia Pty Ltd and Acquest Property Pty Ltd) entering into liquidation on 10 June 2019, the liquidator has commenced gathering the assets of the companies available to meet creditors’ claims. ASIC expects that the liquidators will investigate possible breaches of the law, for example by the directors of the companies, and report to ASIC on their findings.

Given the impact of this matter, ASIC has prioritised it so that it can take appropriate court action against those responsible, where there has been a breach of the laws it administers (such as the Corporations Act). ASIC will keep investors updated on any significant developments in relation to this work via the ASIC website.

There are currently a number of avenues available to individual investors to protect their interests, including seeking compensation.

Let’s recall that the Sterling Income Trust (SIT) has triggered regulatory concerns for several years. In September 2017, ASIC issued a stop order on Product Disclosure Statements issued by Theta Asset Management Ltd (Theta). The stop order was due to concerns about Product Disclosure Statements for Sterling Income Trust (SIT), including inadequate disclosure of risks and conflicts of interests, omission of material information about the investment, presentation of prospective information about target returns, and outdated and incorrect references.

Upon becoming aware in December 2018 that some further funds were being received by the Sterling Group from Sterling New Life Lease tenants/ investors for investments in Redeemable Preference Shares, ASIC took immediate steps to require this to stop. Following enquiries by ASIC in April 2019, the Board of Directors of the Holding company of the Sterling Group appointed Martin Jones and Wayne Rushton of Ferrier Hodgson as Voluntary Administrators on May 3, 2019.

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