Court winds up SMSF firm over misuse of funds
The Federal Court of Australia has wound up the AFSL of an SMSF firm after its director misused over $4.7 million in client money, including funds from SMSFs.
Following an ASIC investigation, the Federal Court of Australia has wound up Australian financial services licensee CFS Private Wealth Pty Ltd and Combined Financial Solutions Pty Ltd, a corporate authorised representative of CFS Private Wealth.
It also restrained its director, Graeme Walter Miller, from providing financial services for 25 years. Mr Miller has also been disqualified from managing corporations for three years.
In an online statement, ASIC said that since 2008, Mr Miller had advised clients of CFS Private Wealth, many of them SMSFs, to transfer over $4.7 million to another related company, CFS Corporation Pty Ltd, apparently for investment purposes.
According to ASIC, Mr Miller instead used those funds for his own personal purposes and to make interest payments to other clients — conduct described by Justice Reeves in his judgment as a “blatant misuse of investor funds”.
In restraining Mr Miller from providing financial services for 25 years, Justice Reeves had regard to Mr Miller’s “frequent and ongoing misuse of his clients’ superannuation savings for personal purposes over a number of years, in a long series of transactions which displayed what [he considered] to be a serious degree of personal dishonest”.
Justice Reeves found no evidence that Mr Miller had demonstrated any remorse for, or shown any appreciation of, the disastrous effects of his wrongdoing on his former. He also found that there was no evidence that Mr Miller had any prospects of reforming his behaviour.
The court also found that CFS Private Wealth failed to provide financial services efficiently, honestly and fairly, in contravention of s912A of the Corporations Act 2001; failed to lodge its financial reports with ASIC for the 2016 and 2017 financial years; and lodged its financial reports for the 2010, 2011, 2013, 2014 and 2015 financial years after the due date.
It also found that it had insufficient assets to meet the conditions of its financial services licence and did not adequately document client investments, including client names, amounts invested, amounts repaid (if any) and the name of the company invested in.
The court has appointed Jamie Harris and Anthony Connelly of McGrath Nicol as liquidators of CFS Private Wealth and Combined Financial Solutions Pty Ltd.
While ASIC sought the reinstatement and winding up of a third related company, BDM Asia Pacific Pty Ltd, formerly known as CFS Corporation Pty Ltd, the court declined to make such orders. ASIC said that it is reviewing the judgment in this regard.
ASIC said that its investigation into Mr Miller is continuing.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
