ASIC, Property, SMSF

Unlicensed SMSF property scheme wound up

unlicensed SMSF scheme

The Federal Court has ordered an unlicensed SMSF investment scheme to be wound up and a lifetime ban from managing corporations for one of its directors.

The Federal Court has ordered that an unlicensed financial adviser who encouraged investors to establish an SMSF to invest in property be restrained from carrying on a financial business and an unregistered managed investment scheme operated by the adviser be wound up.

The Australian Securities and Investments Commission (ASIC) stated the court ordered the actions in relation to Monica Kaur and Perth-based MKS Property Investments/Developments Pty Ltd advising 300 investors to establish an SMSF to invest in property investments and developments set up by MKS Property, which raised $11.3 million.

The court action was initiated by ASIC, which stated Kaur and her husband, Sadu Singh, were directors at various times of MKS Property and between 1 March 2017 and 16 December 2020, by encouraging investors to establish an SMSF and invest via MKS Property, Kaur and MKS Property operated an unregistered managed investment scheme without a licence or the required registration.

“The court further found that by deferring all matters regarding the affairs of MKS Property to Ms Kaur, Mr Sadu Singh breached his directors’ duties by failing to exercise his powers and discharge those duties with the degree of care and diligence that a reasonable person would exercise,” ASIC stated.

“The court ordered that Ms Kaur be permanently restrained from carrying on a financial services business in Australia and operating an unregistered managed investment scheme,” the corporate watchdog said, adding Kaur had been disqualified from managing corporations for life and Singh had been disqualified for 15 years.

As a result of the court order, MKS Property will be wound up, with David Hodgson and Andrew Hewitt of Grant Thornton appointed as receivers of the property of Kaur, Singh and the scheme and as liquidators of the scheme and MKS Property.

In handing down his decision, Justice Jackson said: “The venture into which Ms Kaur directed investor funds was risky and speculative as is shown by the likelihood that most if not all of the funds of many of the investors have been lost.

“Inadequate record-keeping and a lack of controls over what was done with the funds are likely to exacerbate the losses and the difficulty of making any recovery on behalf of investors. The losses are going to be in the millions of dollars and are likely to impact on the retirement savings of many individuals.”

ASIC commenced action against Kaur and MKS Property in August 2021 after it had obtained interim travel restraint and asset-freezing orders in proceedings against Kaur, MKS Property, Sadu Singh, Paradise Property Group Pty Ltd, Melvin Paul Singh and Stephanie Lee in December 2020.

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