Update from ASIC regarding Sterling Group investigation

 

26 July 2019 Update

ASIC has received more than 100 letters addressed to ASIC Chair James Shipton over the past two weeks. Many of the letters refer to a demand from Ms Denise Brailey to the ASIC Chair to make a fund of $26 million available to compensate those who have suffered loss as a result of investments promoted by the Sterling group of companies.

ASIC acknowledges the concerns and uncertainty currently being experienced by those who have invested in investments promoted by the Sterling group of companies, particularly Sterling New Life tenants.

Unfortunately, ASIC is unable to assist in the manner requested. ASIC is not able to directly make funds available for the compensation of investors who have suffered loss.

ASIC has taken significant action with a view to protecting investors. For example, since ASIC’s involvement:

  • the promotion of units in the Sterling Income Trust under the original Product Disclosure Statement has been prohibited
  • Theta Asset Management Ltd has taken action to wind up the Sterling Income Trust
  • the directors of the Sterling group of companies have resolved to appoint voluntary administers to the companies. With creditors voting in favour of most of the companies (other than Rental Management Australia Pty Ltd and Acquest Property Pty Ltd) entering into liquidation on 10 June 2019, the liquidator has commenced gathering the assets of the companies available to meet creditors’ claims. ASIC expects that the liquidators will investigate possible breaches of the law, for example by the directors of the companies, and report to ASIC on their findings.

Given its impact, ASIC has prioritised this matter so that it can take appropriate court action against those responsible, where there has been a breach of the laws it administers (such as the Corporations Act). ASIC will keep investors updated on any significant developments in relation to this work via the ASIC website.

ASIC will also continue working with the liquidators of the Sterling group of companies and the Western Australian Department of Mines, Industry Regulation and Safety (Consumer Protection Division) (which is responsible for the licensing and supervision of real estate agents and laws in relation to residential tenancies).

AVENUES OF ASSISTANCE FOR INVESTORS:

There are currently a number of avenues available to individual investors to protect their interests, including seeking compensation. It is important that investors consider pursuing these avenues at the earliest opportunity, as delay in doing so may adversely affect investors’ interests.

For ease of reference, the avenues of assistance are:

FOR THOSE INVESTORS WHO HAVE INVESTED IN THE STERLING INCOME TRUST (SIT) OVERSEEN BY THETA ASSET MANAGEMENT LTD (THETA):

A letter dated 9 May 2019 from Theta to all investors in the SIT set out the rights of investors in the SIT and how to make complaints to Theta. In that letter Theta stated that its compliance manager would aim to resolve complaints within 45 days, but if you were not satisfied with its response you could lodge a complaint with the Australian Financial Complaints Authority (AFCA).

Further information about how to make a complaint about a financial firm can be found in ASIC Information Sheet 174 via the following link - https://asic.gov.au/about-asic/contact-us/how-to-complain/disputes-with-financial-firms/

It is important to be aware that AFCA will generally only be able to consider your complaint if it is made within six years after you first became aware, or ‘should reasonably have become aware’, that you suffered the loss you want to complain about; or if you have already complained directly to your financial firm through its internal dispute resolution (IDR) process, within two years of getting a response from your financial firm through that process. However, AFCA has advised that it will accept complaints about conduct of financial firms dating back to 1 January 2008 even if they would normally fall outside these time limits, provided those complaints are lodged between 1 July 2019 and 30 June 2020 (see the material on their website about legacy complaints for more information regarding this). AFCA may possibly extend its time limits outside this period, however you should not rely on this.

AFCA may provide a remedy ifyou have incurred loss that was caused by a financial firm’s conduct. It may order that you be compensated for your loss to the extent AFCA holds the financial firm responsible for that loss. Further information on how AFCA deals with complaints and the relevant time limits can be found at https://www.afca.org.au/.

FOR INVESTORS WHO HAVE ENTERED INTO A STERLING NEW LIFE LEASE:

Macquarie Bank

After an approach by ASIC, despite having no legal obligation to do so, the secured creditor of the Sterling Group, Macquarie Bank, has made available Macquarie’s Client Care Team to speak to Sterling New Life lease tenants / investors about their particular individual circumstances, to try to offer assistance where it can. Those tenants/ investors are able to access that assistance via the office of the liquidators of the Sterling group of companies, Ferrier Hodgson, on sterling@fh.com.au or 08 9214 1473. Macquarie Bank had no involvement in promoting Sterling New Life leases, but is making its Client Care Team staff available to try to offer assistance where it can to tenants in a vulnerable position. Landlords in a vulnerable situation are advised to consider contacting their own bank/ finance-provider, which will have a similar Client Care/Vulnerable Client team to Macquarie, and be in a better position to discuss with the landlord his or her individual circumstances.

FOR INVESTORS WHO HAVE ENTERED INTO A STERLING NEW LIFE LEASE AND AFFECTED LANDLORDS:

The Department of Mines Industry Regulation and Safety (Consumer Protection Division)

Advice on tenancy rights is available via (08) 6552 9232 and jan.fairfield@dmirs.wa.gov.au

Tenancy WA

Advice on tenancy matters is available via (08) 9221 0088 or locate a tenancy advocate at http://www.tenancywa.org.au/find-a-tenant-advocate

FOR ALL INVESTORS IN INVESTMENTS OFFERED BY THE STERLING GROUP OF COMPANIES:

Financial Counsellors’ Association of Western Australia.

Free independent financial counselling and legal advice on (08) 9325 1617

Consumer Credit Legal Services

Provides legal advice and representation to consumers in WA in the areas of credit, banking and finance on (08) 9221 7066 and https://cclswa.org.au/about-us/about-cclswa/. There are time periods within which legal proceedings must be commenced. You should therefore seek legal advice to ensure that you will not be prevented from taking any legal action you might wish to take in the future due to these time limitations.

Anglicare WA

Offers a wide range of services, with almost 50 service locations across WA

Financial and general counselling services on 1300 11 44 46

COMMUNICATION OF THIS AND FUTURE UPDATES

Although no two investors will have had exactly the same dealings with the Sterling group or are currently in exactly the same circumstances, there are many issues of concern that are common to those who have written to ASIC. It is therefore ASIC’s assessment that it is appropriate that all investors and their families who have written to ASIC over the past two weeks should receive the same information. It is hoped that taking this approach will avoid causing any confusion. As Ms Brailey has separately written to ASIC to advocate on behalf of investors, ASIC will also send a copy of this update to Ms Brailey for her information and in response to the issues she has raised, and also to investors and their family members who have written to us.

Although there are strict legal restrictions on ASIC’s ability to share information regarding its investigations, as stated above ASIC will provide such updates as it lawfully can in relation to any significant developments in its investigation via the ASIC website.


Previous Update

Further to the appointment of Martin Jones and Wayne Rushton, of Ferrier Hodgson, as Voluntary Administrators of the Sterling Group of companies by the Board of Directors of the Holding company of the Sterling Group, ASIC wishes to provide the following update to investors:

  • ASIC has an ongoing investigation into matters including the promotion of investments in the Sterling Income Trust and other investments offered by the Sterling Group, including to Sterling New Life Lease tenants/ investors;
  • ASIC is aware that there are approximately 100 Sterling New Life Lease tenants/ investors, who are in a vulnerable position in respect of their tenancies;
  • After an approach by ASIC, despite having no legal obligation to do so, the secured creditor of the Sterling Group, Macquarie Bank, has made available Macquarie’s Client Care Team to speak to the Sterling New Life Lease tenants/ investors about their particular individual circumstances, to try to offer assistance where it can. Those tenants/ investors are able to access that assistance via the Voluntary Administrators, Ferrier Hodgson, on sterling@fh.com.au or 08 9214 1473. Macquarie Bank had no involvement in promoting Sterling New Life Leases, but is making its Client Care Team staff available to try to offer assistance where it can to tenants in a vulnerable position. Landlords in a vulnerable situation are advised to consider contacting their own bank/ finance-provider, which will have a similar Client Care/Vulnerable Client team to Macquarie, and be in a better position to discuss with the landlord his or her individual circumstances;
  • ASIC will continue to approach investors to seek information in the course of its investigation. To date, ASIC has spoken to 44 Sterling New Life Tenants/Investors.
  • As the investigation is ongoing, ASIC will not be making any further comment in relation to its investigation at this time;
  • Sterling Group investors seeking up to date information regarding their rights should contact the Voluntary Administrators, Ferrier Hodgson on sterling@fh.com.au or 08 9214 1473;
  • Investors in the registered managed investment scheme, the Sterling Income Trust (SIT), are referred to a letter they should have received dated 9 May 2019 from the Responsible Entity for that scheme, Theta Asset Management, informing them of their rights and of the procedure to make complaints to Theta.

Background

  • As a result of ASIC surveillance activity, on 30 April 2018, the SIT Product Disclosure Statement offering investments in the SIT was withdrawn from the market by the Responsible Entity Theta Asset Management (Theta);
  • Subsequent to discussions with ASIC, Theta decided on 27 August 2018 to wind up the SIT in an orderly manner;
  • Upon becoming aware in December 2018 that some further funds were being received by the Sterling Group from Sterling New Life Lease tenants/ investors for investments in Redeemable Preference Shares, ASIC took immediate steps to require this to stop;
  • Subsequent to enquiries by ASIC in April 2019, the Board of Directors of the Holding company of the Sterling Group appointed Martin Jones and Wayne Rushton of Ferrier Hodgson as Voluntary Administrators on 3 May 2019.
Last updated: 26/07/2019 05:30