Mayfair 101 Group has been found to have made false, misleading and deceptive statements with regard to advertising of its debenture products by the Federal Court as a result of proceedings brought by the Australian Securities and Investments Commission (ASIC) in April last year.
The false, misleading and deceptive statements were deemed to have been made by the fund manager through claims its debenture products had a comparable risk profile to bank term deposits when they carried a greater level of risk, representations the principal investment on these offerings would be repaid in full at maturity when this was not the case and when Mayfair had the ability to extend the repayment time indefinitely, and claims the debentures carried no default risk when the likelihood was investors could lose their entire principal amount.
The decision was made against Mayfair Wealth Partners Pty Ltd trading as Mayfair Platinum, Online Investments Pty Ltd trading as Mayfair 101, M101 Nominees Pty Ltd and M101 Holdings Pty Ltd.
In handing down the decision, Justice Stewart Anderson said the comparison to bank term deposits “was misleading or deceptive and created a false and misleading impression that the Mayfair products were comparable to, and of similar risk profile to, bank term deposits … In light of the evidence relied on by ASIC, the Mayfair products are not comparable to, or a proper alternative to, bank term deposits.”
Justice Anderson noted Mayfair 101 Group had clearly targeted its marketing campaign at individuals looking to invest in term deposits.
Further, the court found further misleading and deceptive conduct and misrepresentations were made by Mayfair Platinum, Mayfair 101 and M1 Nominees with regard to the M Core Fixed Income Notes they promoted as fully secured investment instruments, when in reality money from these products was loaned to a related party and not secured by first-ranking, unencumbered asset security or on a dollar-for-dollar basis or at all, used to pay deposits on properties prior to any security interest being registered, and used to purchase assets that were not secured by first-ranking, unencumbered asset security.
“I am satisfied that the Mayfair products have been, in fact, designed by the defendants to produce a result which is uncertain for investors and could not on any reasonable view be described as an investment with no risk of default,” Justice Anderson said.
In addition, the court found Mayfair 101 Group director James Mawhinney “was the directing mind and will, and the ultimate beneficiary, of each of the defendants”.
ASIC deputy chair Karen Chester said the decision emphasised the importance for organisations to do the right thing by their investors no matter whether they are retail or wholesale investors.
Last month, the Federal Court issued orders to have M101 Nominees Pty Ltd wound up.
