The Federal Court has handed down a penalty of $30 million to four companies in Mayfair 101 Group for making false or misleading representations in the promotion of two financial products.
Specifically, Mayfair Wealth Partners was fined $10 million, M101 Holdings was fined $8 million, M101 Nominees, already in liquidation, was fined $8 million and Online Investments was fined $4 million.
The court found the four companies marketed the M+ and M Core Fixed Income notes in a misleading and inaccurate manner as a result of claims the offerings had a similar risk level to term deposits when they carried significantly higher risk, claims the notes carried no risk of default when there was a possibility individuals could lose some or all of their principal investment, claims the principal amount invested would be repaid in full on maturity when this may not occur as the manager had the ability to extend the time for repayment, and claims the M Core Notes were fully secured when they were not.
“The defendants deliberately misled investors into investing in the Mayfair products under the belief that they would be of low risk when in fact the Mayfair products were highly speculative and carried very substantial risk,” Justice Anderson said when handing down the decision.
Anderson added director of the four companies James Mawhinney had shown no remorse for the losses and harm caused to people who had invested in Mayfair 101 Group’s products.
Australian Securities and Investments Commission (ASIC) deputy chair Sarah Court said: “This penalty makes clear that firms must do the right thing by their investors, irrespective of whether they are wholesale or retail investors. Failing to accurately advertise financial products can result in significant penalties for firms.”
The court also permanently restrained Mayfair 101 from using the phrases ‘term deposit’ and ‘certainty’ in any of its future advertising activities.
The $30 million penalty is significantly larger than the original fine of $12 million ASIC was pursuing after its original investigation into the matter.
Mayfair 101 Group made a legal challenge against the ASIC $12 million fine in October and has declared it will be taking similar action following the latest decision from the Federal Court.
In making the announcement, Mawhinney noted the magnitude of the penalty strengthened the organisation’s grounds for appeal.
“It is another questionable court decision, which we intend on having overturned. It is no surprise the court has stood by its original findings. The case on whether we made misleading representations in our advertising was undefended as ASIC had frozen our business activities, making it unfeasible to defend,” he said.
“I have instructed Roberts Gray Lawyers to prepare a notice of appeal as our prospects of appeal are strong. I look forward to having both cases heard by the full court, along with the appeal of my 20-year ban, in May 2022.”
