Enforcement: ASIC takes further action over IC Group

The following is the text of an ASIC statement dated 11 November 2011.

The EU bans Ms Percival from involvement in the financial services industry, as an adviser, licensee or authorised representative of a licensee, for 10 years.
The EU follows an ASIC investigation into financial advice to retail investors provided by Ms Percival as an authorized representative of AAA Shares Pty Ltd. This advice related to investments in a number of investment companies known as the IC Group. The IC Group operated principally from the Gold Coast under the management and control of Ms Percival.
ASIC was concerned that in providing this advice, Ms Percival failed to adequately explain the basis of her advice, take into account many investors’ personal circumstances, advise many clients of the unsecured nature and risks of the proposed investment or of her own interest in the financial products she was recommending.
ASIC was also concerned that when recommending and assisting a number of investors to transfer existing superannuation benefits into self managed superannuation funds, Ms Percival failed to provide them with the required comparative information regarding the switch costs and obligations associated with conducting a self managed superannuation fund.
In a number of instances, Statements of Advice were not issued and where they were issued, they often did not contain the above prescribed information.
ASIC accepted the EU as an alternative to pursuing an administrative banning of Ms Percival under section 920A the Corporations Act.

Background
The investment companies within IC Group were set up and operated to raise funds from investors to assist in financing various property development projects being undertaken by IC Group related companies. The IC Group operated from Bundall on the Gold Coast under the management and control of Ms Percival, who was declared bankrupt on 24 November 2009.
Between May 2002 and September 2008, the IC Group investment companies raised over $20 million from at least 500 investors. In each case, investors were encouraged to invest funds into the companies on the basis that their funds were to be on-lent to particular related property development companies at a higher interest rate. Returns to investors relied upon the related property development companies generating sufficient returns and profits to meet their loan commitments to the investment companies.
From about 2008, many of the property development companies experienced financial difficulties, resulting in the appointment of receivers and the forced sale of their development properties to satisfy debts to their principal financier, the National Australia Bank. Once the development companies were unable to meet their commitments to the investment companies, the investment companies were unable to meet their commitments to investors and the companies became insolvent.
On ASIC’s application, the Supreme Court of Queensland made orders on 23 August 2010 appointing Messrs Peter Dinoris and Nick Combis of Vincents Chartered Accountants to wind up four of the IC Group investment companies. These companies were Supersafe Australia Pty Ltd, Supersafe Qld Pty Ltd, Northcoast (Qld) Australia Pty Ltd and Supersafe N.S.W. Pty Ltd. A fifth IC Group Investment company, Bricks and Mortar Ltd, was deregistered by ASIC in May 2010