Wednesday 13 December 2006 LAWFUEL – Law News Network – The Australian Securities and Investments Commission (ASIC) has intervened in an application brought by Sovereign Capital Limited (Sovereign) to wind up the Sovereign Prudential Fund. Sovereign brought an urgent application to obtain orders from the Supreme Court of Queensland to allow Sovereign to wind up the Fund.
The application was that the Fund be wound up on just and equitable grounds, because amongst other things, Sovereign’s professional indemnity insurance was not being renewed. The requirement to hold professional indemnity insurance forms part of Sovereign’s licence conditions as a Responsible Entity for the Fund. ASIC intervened in the application, seeking the appointment of an independent liquidator, because it was concerned that Sovereign was not the appropriate entity to wind up the Fund.
Specifically, ASIC had commenced administrative action to have Sovereign’s Australian Financial Services licence revoked or suspended for breaches of their general compliance obligations. Instead of appointing an independent liquidator, the Court ordered that Sovereign be permitted to wind up the Fund under the supervision of Mr William Fletcher, of Bentleys MRI, who was appointed to act in the capacity as Supervising Accountant. ‘ASIC’s intervention was aimed to ensure members’ interests were protected and maintain public confidence during the winding up process of the Sovereign Prudential Fund.
The reporting obligations imposed on Sovereign largely address ASIC’s concerns, prior to a decision being made on the status of Sovereign’s licence’, Ms Jennifer O’Donnell, ASIC Executive Director of Compliance, said.
The Court further directed that in the course of the winding up of the Fund, Sovereign provide to the Supervising Accountant and ASIC, a report (on a monthly basis beginning 12 January 2007) on the following matters: • the progress of the realisation of investments in which member’s funds have been invested; • a list of all receipts and payments made by Sovereign in the preceding month; and • a copy of settlement statements (if any) on the sale of any real property assets of the Fund. Sovereign is also required to write to each of the investors in the Fund to inform them of the nature of the application and the terms of the Court orders.
Further, the costs, expenses and remuneration of the Supervising Accountant, up to a limit of $50,000, is to be paid by Sovereign. Sovereign, ASIC, the Supervisory Accountant and any investor in the Fund have liberty to apply to the Court in relation to these orders by giving five days notice in writing. Background The Sovereign Prudential Fund is involved in lending money to property developers in New South Wales Victoria and Queensland. Based on the information provided to the Court, the Fund has approximately $54m invested on behalf of approximately 700 investors. For further information contact: Angela Friend ASIC Media Unit Telephone: 03 9280 3338 Mobile: 0412 058 800