The tribunal upheld a 2015 Australian Securities & Investments Commission’s (ASIC) decision to ban Michael O'Sullivan from providing financial services for seven years – which will be in place until 16 February 2022 – but reduced his disqualification from managing corporations from five years to two years and nine months (until 20 September 2024).
The decision, which was handed down on 27 January 2022, found Mr O'Sullivan “failed to exercise due care and diligence” while in the management of the “largest loan” (the Burleigh Views Loan) made by Provident Capital Limited (PCL), by “deciding to accrue interest on that loan” rather than characterising it as being in arrears.
In reviewing ASIC’s findings, on remittal of the hearing this year, the tribunal found that Mr O'Sullivan had “made inadequate disclosures or misleading statements” and “used his position improperly to gain advantages for himself”.
ASIC’s 2015 banning order was based on findings that Provident Capital had failed to disclose information about a “loan it had made to a project specific development corporation named Burleigh Views Pty Ltd (“Burleigh Views”).
The regulator said “PCL had advanced funds to Burleigh Views in accordance with a $4 million, 12-month mortgage loan agreement”, for the “purpose of funding the $1-million purchase, and the $3-million, two stage, 36 residential unit development, of a property at Burleigh Heads”.
By May 2008, Burleigh Views had not completed the first stage of the development and had “failed to repay the loan” and as a result of that default “PCL took possession of the property as mortgagee” and Burleigh Views went into liquidation in August 2008 – resulting in a loan debt of $13.5 million, the regulator stated.
PCL went into liquidation on 24 October 2012, taking the Burleigh Views loan balance to about $22 million.
In this year’s review of ASIC’s findings, the tribunal found PCL made “ inadequate disclosures or misleading statements to the debenture trustee, Australian Executor Trustees Limited (AETL) about the “status of the Burleigh View Loan, the status of the development approval, the valuation information about the property, and the risk of a debt shortfall on any realisation of the property”.
Three of Mr O'Sullivan’s PCL co-directors had also been the subject of adverse ASIC decisions, and had made their own review applications to the tribunal.
[Related: Non-bank lender loses banning appeal]