In a case that serves as a warning to anyone banned by ASIC, the regulator is pursuing criminal charges against a former QLD financial adviser for breaching a banning order.
On 6 September 2017, Lawrence Toledo, from Queensland, was banned from providing financial services for a period of 7 years. His name was entered on the “Banned / Disqualified” Register maintained by ASIC.
ASIC has now charged Mr Toledo alleging he breached the banning order. Mr Toledo faces three charges in the Queensland Magistrates’ Court, each with a maximum penalty of 6 months imprisonment or a $5,250 fine, or both.
In the proceedings before the Magistrates’ Court (which are being prosecuted by the Commonwealth Director of Public Prosecutions), ASIC alleges that Mr Toledo breached the banning order by providing financial advice to an SMSF and its trustees, by recommending the fund subscribe for $84,000 of shares in an entity controlled entirely by Mr Toledo’s partner. The relationship was not disclosed to the SMSF or its trustees.
The case serves as a stark warning of the serious implications that can follow breaching a banning order.
But as we have previously commented, knowing what you can and can’t do under a banning order is not always straightforward. The financial services laws are notoriously complex – labyrinthine in fact – and whether an activity is the provision of a financial service or not – can be a matter of differing legal opinion. The recent expansion of the types of banning orders ASIC can make – to ban a person from controlling an entity that provides financial services or engages in credit activities, or performing any function in such an entity (see our article here), in addition to banning the provision of financial services – should provide some clarity where these broader orders are made.
Regardless, there remains scope for uncertainty in particular where a banned person or entity is looking to continue business in some form or in an ancillary service to the industry. In any event, the implications of getting it wrong are potentially severe.,.
Mr Toledo’s matter is listed for further mention in the Brisbane Magistrates’ Court on 29 October 2021.
We don’t know whether this sort of complexity was an issue in Mr Toledo’s case. But one thing appears clear – that ASIC will increasingly pursue criminal sanctions for breaches of banning orders, and a wider range of l contraventions of the Corporations Act 2001. Given ASIC’s current muscular approach, there is a material risk that any person who breaches a banning order will face criminal consequences.
Dan Mackay, Director, and Charles Haszler, Lawyer