ASIC starts civil proceedings against former officers of MFS

ASIC starts civil proceedings against former officers of MFS

The Australian Securities and Investments Commission has commenced civil proceedings in the Supreme Court of Queensland against three subsidiary companies of the formerly listed MFS (now known as Octaviar) and four former officers and one manager of MFS Investment Management.

The proceedings relate to the use of AUD147.5mi in funds of the Premium Income Fund, for which MFS Investment Management (now known as Managed Investments) was the responsible entity at the relevant time.

In taking this action, ASIC is addressing the core obligations of a responsible entity and its directors and officers to operate the fund with care and diligence, and in the best interest of the fund’s members.

The defendants in the matter are: Michael Christodoulou King, former chief executive officer and director of MFS; Craig Robert White, former deputy chief executive and director of MFS and MFSIM; Guy Hutchings, former chief executive and director of MFSIM; David Mark Anderson, former chief financial officer and company secretary of MFS; Marilyn Anne Watts, former fund manager of MFSIM; Managed Investments; Octaviar Administration; and Octaviar Castle.

ASIC is seeking orders for declarations of contraventions, pecuniary penalties, compensation and disqualifications from managing corporations.

ASIC alleges that in November 2007, officers of MFSIM caused PIF to transfer AUD130m to MFS Administration so that MFS Administration could use those funds to pay financial obligations of other MFS subsidiaries, including AUD103m owed to Fortress Credit by MFS Castle.

ASIC also alleges that in December 2007, officers of MFSIM caused PIF to transfer AUD17.5m to MFS Pacific Finance, a New Zealand registered company (now known as OPI Pacific Finance).

ASIC further alleges that in about January 2008, officers and the fund manager of MFSIM created and used false documents, relating to the use of the AUD147.5m.

As a result of the funds being transferred, ASIC alleges that the PIF suffered a loss of AUD147.5m.

MFS was a publicly listed company with interests in financial services, travel and leisure and child care businesses. MFSIM was an unlisted public company and wholly owned subsidiary of MFS (now in liquidation). MFSIM was the responsible entity for six unlisted managed investment schemes, including the PIF and the Maximum Yield Fund.

The PIF was an unlisted managed investment scheme which offered investments to retail and wholesale investors through a product disclosure statement.

Wellington Capital took over as responsible entity of the PIF in late 2008. PIF units have since been listed on the National Stock Exchange.

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