Investment company Mayfair 101 Group has welcomed the opportunity to challenge the Australian Securities and Investments Commission (ASIC) intention to levy a financial penalty of $12 million for misleading and deceptive conduct and has used the penalty hearing to refute several key aspects of the regulator’s case.
Mayfair 101 Group was granted a penalty hearing that ended on 5 October and used the process to refute four key points ASIC used in an effort to justify the proposed $12 million worth of fines to be levied against the investment house.
Firstly, Mayfair claimed the court-appointed provisional liquidator on the Eleuthera facility misread an eight-page agreement leading to an incorrect interpretation that the agreement involved a single 10-year loan rather than multiple short-term advances.
This in turn resulted in the wind-up of M 101 Nominees Pty Ltd, the issuer of M Core notes, on the basis the entity was insolvent and unsustainable.
Mayfair also argued against the conclusion put forward by ASIC’s special counsel there was not value in the security offered to M Core noteholders and managed to get the regulator to change its position on this matter after ASIC’s expert witness indicated the security had value. The original classification of the security led to group director James Mawhinney receiving a 20-year financial services ban.
In addition, it was requested ASIC provide proof to the Federal Court to support its allegation Mawhinney had transferred investor funds to the British Virgin Islands.
Finally, Mayfair managed to receive an admission a comma omitted from the regulator’s instructions to its expert witness engaged to report on the security of the M Core notes was significant to formulating the decision to fine the group.
“This hearing was notable for the fact that after almost two years of investigation, ASIC cross-examined me on 30 September – the first time the regulator has interviewed me in any capacity about the operations and investment strategy of the Mayfair Group,” Mawhinney said.
