A court has found Theta Asset Management and its managing director contravened the Corporations Act on multiple occasions in authorising the issues of five defective Product Disclosure Statements (PDSs).
The court has ordered Theta to pay a penalty of $2 million with respect to authorising the issue of five defective PDSs on behalf of Sterling Income Trust.
Additionally, the court ordered Theta managing director Robert Marie to pay a penalty of $100,000 for his role. Marie was also disqualified for four years from managing corporations.
ASIC said it will not seek recovery of the penalty against Theta, as doing so would decrease the funds available for distribution by the liquidator of Theta to its creditors.
Theta placed itself into voluntary administration in December last year and appointed Worrells Solvency and Forensic Accountants as administrators of itself and Value Stream Investment Management.
ASIC issued proceedings against Theta and Marie on 11 December 2019. The court found that Theta breached the Corporations Act and failed to comply with its duties as a responsible entity.
The court also found that Marie contravened the Corporations Act and failed to comply with his duties as a managing director of Theta.
Theta and Marie admitted the contraventions in a statement filed with the court along with joint submissions for declarations, civil penalties and the disqualification order to be imposed.
The judge noted in handing down his judgment that the circumstances involved catastrophic losses sustained by investors.
ASIC commissioner Cathie Armour said: "The Federal Court outcome sends an important deterrent message to other responsible entities, as well as to those entrusted to act as gatekeepers, to ensure they comply with their legal obligations."
"ASIC will take action to hold gatekeepers to account."
In total, between 20 May 2016 to 30 April 2018, $16,749,974 was raised from retail investors pursuant to the defective PDSs.
ASIC said its investigation into conduct by entities and officers within the Sterling Group of companies is continuing.