Caines and Australian Securities and Investments Commission [2011] AATA 169 (16 March 2011)

Last Updated: 28 March 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 169

ADMINISTRATIVE APPEALS TRIBUNAL )

) No: 2010/4515

GENERAL ADMINISTRATIVE DIVISION )

Re Ronald Caines

Applicant

And Australian Securities and Investments Commission

Respondent

DECISION

Tribunal Mr RP Handley, Deputy President

Date 16 March 2011

Place Sydney

Decision The Tribunal varies the banning order made by the Australian Securities and Investments Commission against Mr Caines on 5 August 2008 by reducing the duration of the banning order to a period of three years from the time of service of the original order on 12 August 2008, upon the Tribunal accepting an enforceable undertaking from Mr Caines that:

(1) He will undertake and satisfactorily complete within a period of 12 months from the date of this decision an appropriate professional education course or program approved by the Commission which addresses the issues of conflicts of interests and disclosure requirements under the provisions of the Corporations Act 2001; and

(2) For a period of 12 months from the date of the lifting of the banning order, his work as an authorised representative will be subject to appropriate supervision, approved by ASIC, for compliance with regulatory requirements.

.....................[sgd].....................
Mr RP Handley
Deputy President

CATCHWORDS

CORPORATIONS – application to cancel or vary banning order – financial services provider - change in circumstances on which banning order made – discharge from bankruptcy – proper understanding of disclosure requirements – no dishonesty or intention to defraud – banning order varied upon Tribunal accepting enforceable undertaking - decision set aside

RELEVANT ACTS

Corporations Act 2001 (Cth): ss 920A, 920B, 920D, 947C

Australian Securities and Investments Commission Act 2001 (Cth): s 93AA

CITATIONS

Re Donald v Australian Securities and Investments Commission (2001) 38 ACSR 10; [2001] AATA 366

Re Daws and Australian Securities and Investments Commission [2006] AATA 321

OTHER AUTHORITIES

Australian Securities & Investments Commission Regulatory Guide 175 “Licensing: Financial Product Advisers—Conduct and disclosure” (May 2009)

Australian Securities & Investments Commission Regulatory Guide 181 “Licensing: Managing conflicts of interest” (30 August 2004)

Australian Securities & Investments Commission Regulatory Guide 98 “Licensing: Administrative action against financial service providers (April 2006)

REASONS FOR DECISION

16 March 2011

Mr RP Handley, Deputy President

1. Ronald Caines has applied for the review of a decision of the Australian Securities and Investments Commission (ASIC) to refuse to vary or cancel a banning order made against Mr Caines prohibiting him permanently from providing any financial services.

BACKGROUND

2. On 5 August 2008, a delegate of ASIC made a banning order under s 920A of the Corporations Act 2001 (the Act) prohibiting Mr Caines permanently from providing any financial services. The delegate found that Mr Caines “did not understand a fundamental duty [of disclosure] owed by financial services participants to their clients”, and his statement in ASIC proceedings “demonstrates that he does not yet understand the importance of disclosure obligations under the Act”. The delegate was therefore satisfied that “ASIC has reason to believe that Mr Caines will not comply with a financial services law”.
3. The delegate was also satisfied that Mr Caines’ bankruptcy was relevant to the provision of financial services and that he was a person “who has become insolvent under administration within the meaning of s 920A(1)(bb) of the Act”. The delegate therefore concluded that Mr Caines was unable to manage his financial affairs. Having had regard to the serious nature of Mr Caines’ conduct and in view of the uncertain period of Mr Caines’ bankruptcy, the delegate was reasonably satisfied that the appropriate order was to prohibit Mr Caines permanently from providing any financial services. However, the delegate noted that upon Mr Caines being discharged from bankruptcy and “at such time as he believes he has come to understand his duties and legal obligations as a participant in the financial services industry”, it was open to him to apply to ASIC under s 920D to vary or cancel the banning order.
4. On 1 May 2010, Mr Caines applied to ASIC to lift the banning order on his being discharged from bankruptcy on 3 July 2010. On 6 May 2010, the delegate of ASIC responded that while Mr Caines’ bankruptcy was a factor in her decision to impose a banning order, it would also be necessary for Mr Caines to identify a change in the other circumstances relating to his breach of disclosure requirements. The delegate said in her letter to Mr Caines:

Unless you can identify such a change in the circumstances, apart from your discharge from bankruptcy, I am of the view that the period of banning should continue for a period of 5 years commencing on 12 August 2008, being the date on which the order was served on you.

5. The delegate invited Mr Caines to ask for the matter to be reviewed if he did not agree with the assessment.
6. Mr Caines was discharged from bankruptcy on 3 July 2010. On 13 August 2010, his solicitors wrote to ASIC requesting a lifting of the banning order. On 7 September 2010, the delegate conducted a hearing in relation to Mr Caines’ application and, on 22 September 2010, decided not to vary or cancel the banning order. The delegate found that the relevant circumstances upon which ASIC based the banning order were:

(a) Mr Caines failed to disclose loans to himself, his wife and his company, which were monetary benefits that might reasonably be expected have been capable of influencing the advice given to clients, contrary to section 947C(2) of the Act. [s 920A(1)(e)]
(b) Mr Caines had become an insolvent under administration, contrary to section 920A(1)(bb) of the Act.
(c) ASIC had reason to believe that Mr Caines will not comply with a financial services law. [s 920A(1)(f)]
(d) In such circumstances, a period of prohibition was imposed on Mr Caines from providing financial services. By reference to ASIC Regulatory Guide 98, an appropriate period of banning for the disclosure obligations breaches by Mr Caines was considered to be 5 years. However, having regard to the uncertainty of when Mr Caines’ bankruptcy would end, a permanent banning order was made and in the reasons for decision it was noted that the order could be revoked or varied in the future.

7. The delegate said:

Based on the information presently before me, it would appear that I should make no order at this time. As suggested in the reasons for decision provided with the banning order, the appropriate time for Mr Caines to consider applying for a variation or cancellation of the banning order is after 5 years of the order coming into effect.

8. On 19 October 2010, Mr Caines applied to the Tribunal for a review of this decision.

RELEVANT LEGISLATION

9. The power to vary or cancel a banning order is set out in s 920D of the Act:

920D Variation or cancellation of banning orders
(1) ASIC may vary or cancel a banning order, by giving written notice to the person against whom the order was made, if ASIC is satisfied that it is appropriate to do so because of a change in any of the circumstances based on which ASIC made the order.
(2) ASIC may do so:
(a) on its own initiative; or
(b) if the person against whom the order was made lodges with ASIC an application for ASIC to do so, which is accompanied by the documents, if any, required by regulations made for the purposes of this paragraph.
Note:  For fees in respect of lodging applications, see Part 9.10.
(3) If ASIC proposes not to vary or cancel a banning order in accordance with an application lodged by a person under paragraph (2)(b), ASIC must give the person an opportunity:
(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and
(b) to make submissions to ASIC on the matter.

10. The power to make a banning order is set out in s 920A and the nature and effect of a banning order are explained in s 920B and s 920C respectively:

920A ASIC’s power to make a banning order
(1) ASIC may make a banning order against a person, by giving written notice to the person, if:
(a) ASIC suspends or cancels an Australian financial services licence held by the person; or
(b) the person has not complied with their obligations under section 912A; or
(ba) ASIC has reason to believe that the person will not comply with their obligations under section 912A; or
(bb) the person becomes an insolvent under administration; or
(c) the person is convicted of fraud; or
(e) the person has not complied with a financial services law; or
(f) ASIC has reason to believe that the person will not comply with a financial services law.
(2) However, ASIC may only make a banning order against a person after giving the person an opportunity:
(a) to appear, or be represented, at a hearing before ASIC that takes place in private; and
(b) to make submissions to ASIC on the matter.
(3) Subsection (2) does not apply in so far as ASIC's grounds for making the banning order are or include the following:
(a) that the suspension or cancellation of the relevant licence took place under section 915B;
(b) that the person has been convicted of serious fraud.

920B What is a banning order?
(1) A banning order is a written order that prohibits a person from providing any financial services or specified financial services in specified circumstances or capacities.
(2) The order may prohibit the person against whom it is made from providing a financial service:
(a)  permanently; or
(b)  for a specified period, unless ASIC has reason to believe that the person is not of good fame or character.
(3) A banning order may include a provision allowing the person against whom it was made, subject to any specified conditions:
(a)  to do specified acts; or
(b)  to do specified acts in specified circumstances;
that the order would otherwise prohibit them from doing.

920C Effect of banning orders
(1) A person against whom a banning order is made cannot be granted an Australian financial services licence contrary to the banning order.
(2) A person contravenes this subsection if:
(a)  the person engages in conduct; and
(b)  the conduct breaches a banning order that has been made against the person.
Note:  A contravention of this subsection is an offence (see subsection 1311(1)).

11. The main requirements for a ‘Statement of Advice’ given by an authorised representative to a client are set out in s 947C. This provides relevantly:

947C Statement of advice given by authorised representative—main requirements
(1) This section applies if the providing entity is an authorised representative.
(2) Subject to subsection (3) and to the regulations (see subsection (4)), the Statement of Advice must include the following statements and information:
(a) a statement setting out the advice; and
(b) information about the basis on which the advice is or was given; and
(c) ...
(d) ...
(e) information about the remuneration (including commission) or other benefits that any of the following is to receive that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice:
(i) the providing entity;
(ii) an employer of the providing entity;
(iii) the authorising licensee, or any of the authorising licensees;
(iv) an employee or director of the authorising licensee, or of any of the authorising licensees;
(v) an associate of any of the above;
(vi) any other person in relation to whom the regulations require the information to be provided; and
(f) information about:
(i)  any other interests, whether pecuniary or not and whether direct or indirect, of the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or of any associate of any of those persons; and
(ii) any associations or relationships between the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or any associate of any of those persons, and the issuers of any financial products;
that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice; and
(g) ...
(h) ...
(i) ...
(3) Subject to subsection (4), the level of detail about a matter that is required is such as a person would reasonably require for the purpose of deciding whether to act on the advice as a retail client.
(4) ...
(5) ...
(6) The statements and information included in the Statement of Advice must be worded and presented in a clear, concise and effective manner.

12. The issue in this case is whether the banning order made by the ASIC delegate on 5 August 2008 should be varied or cancelled. The Tribunal, standing in the shoes of the ASIC delegate, may, in accordance with s 920D of the Act, vary or cancel the banning order if satisfied that “it is appropriate to do so because of a change in any of the circumstances based on which ASIC made the order”. It should be noted that the role of the Tribunal is not, in this instance, to review the decision to make the banning order itself.
13. There is no dispute that there has been at least one change in the relevant circumstances based upon which the ASIC order was made, which is that Mr Caines was discharged from bankruptcy on 3 July 2010. The focus of the evidence was, therefore, on whether there were other changes in these circumstances and, in particular, on whether Mr Caines understands the disclosure requirements in s 947C(2) of the Act, and whether, therefore, he will comply with such provisions in the future.

THE CIRCUMSTANCES UPON WHICH THE BANNING ORDER WAS MADE

14. While the Tribunal’s role is not to review ASIC’s decision to make the banning order against Mr Caines, it is, nevertheless, necessary to rehearse some of the facts that led to the making of that decision. This is to enable the Tribunal to make a finding about Mr Caines’ understanding of the disclosure obligations owed by financial services participants to their clients and whether there has been a change in the relevant circumstances since the time of ASIC’s decision. Having said this, I should point out the difficulty I had in understanding the financial arrangements entered into by Mr Caines in the period 2004 to 2006. It appears that I was not alone in this. Mr Caines’ representative, Mr McCartney, also seemed confused, and I suspect that the confusion over exactly what these financial arrangements were and the lack of substantiating evidence is at the root of Mr Caines’ problems. It is probably unfortunate that he did not participate personally in the hearing conducted by the ASIC delegate on 7 September 2010. He gave evidence at the Tribunal hearing at my request. What follows is a brief account of the salient facts as far as I have been able to ascertain them from the material provided to me.
15. Mr Caines was formerly a director, with his wife, of Financial Strategies (Aust) Pty Ltd (FSA). He was an authorised representative of Elm Financial Services (Elm) until early 2004 when Elm appears to have gone into liquidation. (I have no evidence as to the details of this.) He was then an authorised representative of Wright Global Investments Pty Ltd (WGI) from 15 October 2004 to 22 November 2005 and of its successor, Solutions Wealth Strategies Pty Ltd (SWS), from 25 November 2005 until the banning order was made on 5 August 2008. Between about 2 April 2005 and 2 November 2005, and on about 1 May 2006 and 10 October 2006, acting in his capacity as an authorised representative of WGI and SWS, Mr Caines provided statements of advice for clients recommending the financial products of a company associated with Shawn Richard.
16. Mr Caines said that when his business, FSA got into in financial difficulty in 2004 as a result of the collapse of Elm, Mr Richard, whom he had met earlier in the year and with whom he had become friends (they had a mutual interest in baseball), agreed to buy his business for the sum of $300,000. This was paid to FSA in three instalments: (1) on 11 November 2004, $136,019.11 from Shawn Richard, (2) on 16 February 2005, $49,830.57 from Century Investments Holding Group (Century), and (3) on 5 May 2005, $118,981.00 from Mr Richard (a total of $304,830.68). Mr Caines said he had no idea who Century was, but he seems to have assumed the funds transfer was arranged by Mr Richard. (According to ASIC documents, Century is a British Virgin Islands registered company with which Mr Richard was associated.) Mr Caines said following the sale of his business, he arranged for all commission including existing trail commissions to which his company would formerly have been entitled, to be transferred with the sale of the business. It seems the transfer was to WGI, a company with which Mr Richard was associated, as explained below.
17. Mr Caines said he also received seven further payments from Mr Richard which took the form of loans: (4) on 26 July 2005, $25,446.95, (5) on 7 September 2005, $49,216.42, (6) on 24 October 2005, $39,835.35, (7) on 3 November 2005, $10,180.84, (8) on 2 December 2005, $50,328.81, (9) on 13 February 2006, $50,620.95, and (10) on 7 April 2006, $27,207.18. These further payments were in fact all made by Century to FSA. Mr Caines reiterated that he had no idea who Century was, but he assumed these were loan payments from Mr Richard.
18. Mr Caines provided a copy of a draft loan agreement, dated 15 March 2007, which he and his wife and FSA entered into with Mr Richard, at Mr Richard’s request, to secure “loans” made by Mr Richard to Mr and Mrs Caines and FSA in the period 11 November 2004 to 30 January 2007 totalling “seven hundred thirteen thousand three hundred fifty dollars and seventy five cents ($762,175.72)” [sic]. It is not clear whether this agreement was ever finalised and executed.
19. Documents prepared by ASIC in relation to the delegate’s decision on 5 August 2008, indicate that, at that time, Mr Richard had been a director of WGI since 12 July 2001. Mr Richard was also a director of Astarra Funds Management Pty Ltd, the holding company for other Astarra associated companies responsible for the provision of financial products and their management. In his capacity as an authorised representative of WGI and its successor, SWS, Mr Caines recommended investments in Astarra products in Statements of Advice provided to a number of clients. It was in these Statements of Advice that Mr Caines failed to make the disclosures required under s 947C(1)(e) and (f).

MR CAINES’ EVIDENCE ABOUT HIS CURRENT CIRCUMSTANCES

20. In a letter to ASIC dated 1 May 2010, Mr Caines said he fully understood ASIC’s position regarding disclosure issues and, in particular, s 947C(1)(e) and (f) and their relevance to his situation. He said he understood that s 947C(1)(e) and (f):

1. ... were relevant to the personal loans that I received and as I have stated previously it was an error of judgement on my part and there was no malice or intent in relation to the recommendations that I made to my clients.
2. I also fully understand how the disclosure should have been detailed in the Statements of Advice provided to the relevant clients and ASIC’s position regarding this section and its relevance to full ‘transparency’ in Statements of Advice.

21. Mr Caines said that since the banning order was made, he has been unable to find permanent employment:

... because of my age and also the stigma associated with the banning order. The result from a personal and financial viewpoint has been catastrophic. I have struggled both personally and emotionally to come to terms with the Bankruptcy and the banning order, and whilst my family have stuck together during this trying time, we have been devastated financially.

22. Mr Caines said:

... I had not had a single blemish against my character or integrity, nor had my competency been questioned during my career in the financial services industry which had spanned over 30 years.

23. Mr Caines told me that after 34 years of being self-employed in the financial services industry he and his family “lost everything” including their home. He is now aged 58 and still unemployed. He is currently receiving rental assistance and Family Tax Benefit. He has two dependants: a son aged 18 and a daughter aged 14 who is in Year 8 at school. He has had to seek financial help from friends and has, on occasion, sought help from charities in order to pay bills. His wife is a registered nurse and now the “breadwinner” in the family. Mr Caines said he does not own a car but currently has the loan of a car from friends. (In a letter to ASIC dated 2 September 2010, Mr Caines said that his wife had been made bankrupt on 6 January 2010 which had “caused severe financial hardship and also created stressful family relationship situations”.)
24. Mr Caines said he has been offered a position as an authorised representative by Titanium Planners Pty Ltd, part of the Titanium Group, which would set up a specific compliance and supervisory regime under which Mr Caines would operate. This would include scrutinising every Statement of Advice that he gives and conducting a monthly review of all documents produced by him concerning advice given to clients. A letter dated 6 September 2010 from a Director of the Titanium Group to ASIC states that Titanium Planners “are well placed to provide a stringent compliance and supervisory capacity while Mr Caines re-establishes his financial planning career under our license”. The letter also sets out the “structures” Titanium Planners have in place which would be used to meet these requirements.
25. Mr Caines said he is willing to abide by such enforceable undertakings as ASIC may require including as to retraining.
26. Mr Caines said he believed the further seven payments he received from Century to be personal loan payments from a friend which had no bearing on the financial advice he gave to clients of WGI. He now realises that he should have disclosed the loan payments and should only have ever dealt with Mr Richard personally. Mr Caines said if Century was Mr Richard’s company, the loans should have been disclosed.
27. Mr Caines acknowledged that he had told the ASIC delegate at the hearing on 7 July 2008 that all the payments he received from Mr Richard were loan payments. He did not distinguish between loan payments and payments for the sale of his business to Mr Richard. In a letter to the Tribunal dated 3 September 2008 in connection with his application to the Tribunal for the review of the banning order, he referred to a proposal for WGI to purchase his (FSA’s) client base for approximately $300,000 but said this did not proceed “because of the uncertainty of the Elm Dealer group’s collapse”. Whether, instead, Mr Richard agreed to purchase Mr Caines’ client base personally is unclear. At one point in the Tribunal hearing, Mr Caines told me that he does not really know who he sold his business to.
28. Mr Caines also told me that while he can now see that the loans from Mr Richard should have been disclosed, he does not see why payments for the sale of his business should have been disclosed. However, he said this is something in respect of which he would now seek appropriate advice.
29. Mr Caines said he completed a Diploma in Financial Planning some years ago. While he is not currently a member of the Financial Planning Association, in the past he satisfied ongoing professional development requirements. Mr Caines said that for the purpose of gaining a proper understanding of his disclosure obligations, he had undertaken research to try and identify courses on disclosure requirements and conflict management but was unable to find anything appropriate. However, he acknowledged that he had not looked at the ASIC website which, documents produced by ASIC show, has links to financial planning courses, some of which appear to have components on disclosure obligations and conflicts of interest.
30. While Mr Caines said he had studied s 947C of the Act carefully, when asked, he appeared to lack familiarity with ASIC Regulatory Guide 175 “Licensing: Financial Product Advisers--Conduct and disclosure” (May 2009) and with ASIC Regulatory Guide 181 “Licensing: Managing conflicts of interest” (issued 30 August 2004).

SUBMISSIONS

31. Mr Thomas, for Mr Caines, contended that there are three relevant changes in Mr Caines’ circumstances: he has been released from bankruptcy, he has been offered employment and he has a proper understanding of the s 947C disclosure requirements. Mr Caines has said that he would now disclose the loans received from Mr Richard and would seek advice in relation to the sale of his business.
32. Mr Thomas referred the Tribunal to ASIC Regulatory Guide 98 “Licensing: Administrative action against financial services providers” (April 2006) (ASIC Guide 98) and, in particular to p 16, ‘Table 2: Factors and examples of conduct relating to specific periods of banning’. Mr Thomas noted that in Mr Caines’ case, there was no dishonesty or intent to defraud, he did not misappropriate funds and his clients did not suffer any financial loss as a result of his conduct. Mr Thomas submitted that an appropriate period of time for a banning order in Mr Caines’ case is one year and, therefore, the banning order now having been in place for two and a half years, it should be lifted. Mr Caines would be prepared to accept a lifting of the order subject to conditions.
33. Ms Avenell, for ASIC, while acknowledging Mr Caines’ release from bankruptcy, said his employment is not a relevant matter because it is not related to the circumstances on which the banning order was based. Ms Avenell submitted that it is clear that Mr Caines should have disclosed the sale of his business since he received a ‘benefit’ from that sale (s 947C(2)(e)) and it is clear that he had disclosure obligations under s 947C(2)(e) and (f). The explanations Mr Caines has given for his conduct have varied and the efforts he has made to gain a better understanding of his obligations appear to be very limited. Despite legal advice over the last year about his disclosure obligations, it is apparent from his evidence that he still does not understand his obligations. Moreover, he does not appear to be familiar with the relevant ASIC regulatory guides.
34. Referring to ASIC Guide 98, Ms Avenell said that while the ASIC delegate did not find any dishonesty or intention to defraud on Mr Caines’ part, nevertheless, the conflicting evidence he has given raises questions over his honesty or, in any event, suggests serious incompetency. There remains a likelihood that he may contravene a financial services law in the future.

REASONING

35. As mentioned above, the events surrounding the payments made by Mr Richard or Century to Mr Caines’ company FSA remain unclear, notwithstanding that that a significant sum of money was provided. The confusion this has generated and, in particular, the different accounts Mr Caines has given at various times, have undoubtedly not helped his cause. I have not, however, formed the view that there is any dishonesty involved on his part. Rather, he appears still to be muddled in relating what occurred.
36. Mr Caines’ muddled thinking also seems to be reflected in the lack of clarity in his understanding of his obligations in relation to conflicts of interest and disclosure. In my view, Mr Caines should have made a greater effort not only to read s 947C but also to study the relevant ASIC regulatory guides referred to above and to identify relevant and appropriate professional educational programs which he might undertake to ensure that he has the proper level of understanding.
37. Nevertheless, his circumstances have changed in so far as he has been released from bankruptcy, and he is probably, at the very least, aware of the need to seek advice where there are potential conflicts of interests after the various proceedings in which he has been involved over the course of the last three years. I agree with ASIC that the fact of Mr Caines being offered employment is not a relevant change in circumstances, since his employment was not a circumstance on which the banning order was based.
38. The fact of a change in circumstances warrants a review of the banning order and for this purpose it is useful to refer to Table 2 in ASIC Guide 98 where there is a summary of factors and indicative conduct that may be referred to as a guide in determining the severity of the order that is justified in a particular case. The Table identifies three levels of banning order: permanent banning, banning from 3 to 10 years, and banning under 3 years. For each level, relevant factors for consideration and indicative conduct are identified. I have considered whether these factors and indicative conduct are present in this case.
39. In order to do this, the relevant circumstances in Mr Caines’ case must first be identified. The delegate has said that in her view, with Mr Caines’ discharge from bankruptcy, the banning order should “continue for a period of 5 years”. Disregarding the now-discharged bankruptcy, the relevant circumstances in Mr Caines’ case include his failure to comply with disclosure requirements by not disclosing the ‘benefits’ he and FSA received from Mr Richard and/or his associated companies (s 947C(2)(e)) and by not providing information about his relationship with Mr Richard and his associated companies (s 947C(2)(f)). The other relevant circumstance identified by the ASIC delegate is her finding that she “had reason to believe that Mr Caines will not comply with a financial services law”.
40. Secondly, the relevant factors in Mr Caines’ case must be identified. I note that at the hearing before the delegate on 7 September 2010, she accepted that dishonesty was not a factor in Mr Caines’ case (transcript p 86). According to Mr Caines, he received no commissions in respect of the relevant Statements of Advice and the clients in question suffered no losses as a result of his advice. There is also no history of any previous contraventions by Mr Caines or disregard of legal obligations (over a long period of service), and the evidence of the proceedings indicates that Mr Caines co-operated with ASIC, and that his intention expressed to the ASIC delegate at the hearing on 7 July 2008 was to do what he could to recompense his clients who had suffered losses as a result of the collapse of Elm (see, for example, transcript p 34).
41. With regard to Mr Caines’ understanding of his disclosure obligations under the Act, I am satisfied that he has a better understanding than previously but I am not satisfied that he is as wholly conversant with his disclosure obligations as he should be or that he has a full and proper understanding of what his obligations are. In my view, Mr Caines has not demonstrated that he has taken sufficient reasonable steps to ensure that he has a full and proper understanding of his disclosure obligations. Just reading the relevant section of the Act – s 947C – is not enough in the circumstances, and in the light of Mr Caines’ somewhat equivocal statement that he would seek advice about the sale of his business if a similar situation arose today, to satisfy me that he has a full and proper understanding of his obligations. This is addressed in the terms of my decision, which will require him to undertake an appropriate professional development course or program approved by ASIC.
42. In terms of the factors and indicative conduct provided to guide decision-makers in Table 2 of ASIC Guide 98, Mr Caines’ circumstances do not now, in my view, meet the criteria for a permanent banning order. His circumstances are more akin to the higher end of the spectrum for a banning order of the up to three years or the very lowest end of the spectrum for a banning order of three to ten years. However, there remains my concern about his not properly understanding his disclosure obligations under the Act which, in my view, is a legitimate concern for the public interest. In my view, this can be addressed by the Tribunal (standing in the shoes of ASIC) accepting an enforceable undertaking from Mr Caines under s 93AA(1) of the Australian Securities and Investments Commission Act 2001: see, for example, Re Donald and Australian Securities and Investments Commission [2001] AATA 366, at [130], and Re Daws and Australian Securities and Investments Commission [2006] AATA 321.

DECISION

43. I have decided that the appropriate outcome in these circumstances is for me to vary the banning order made by ASIC against Mr Caines on 5 August 2008 by reducing the duration of the banning order to a period of three years from the time of service of the original order on 12 August 2008, upon the Tribunal accepting an enforceable undertaking from Mr Caines that:

(1) He will undertake and satisfactorily complete within a period of 12 months from the date of this decision an appropriate professional education course or program approved by ASIC which addresses the issues of conflicts of interests and disclosure requirements under the provisions of the Act; and

(2) For a period of 12 months from the date of the lifting of the banning order, his work as an authorised representative will be subject to appropriate supervision, approved by ASIC, for compliance with regulatory requirements.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RP Handley, Deputy President

Signed: ..............[sgd]............................................................

A Veness, Associate

Date of Hearing: 25 February 2011

Date of Decision: 16 March 2011

Applicant representative: Simmons & McCartney Lawyers & Attorneys

Respondent representative: Ms A Rees, ASIC

Respondent counsel: Ms M Avenell