Wholesale franchisee Lanterne Fund Services Pty Ltd has been ordered to pay a $1.25 million fine by the Federal Court after failing to comply with six of the general obligations of Australian financial services (AFS) licensees.
In proceedings brought by the Australian Securities and Investments Commission (ASIC), the Tribunal found that Lanterne breached its AFS license obligations between March 2019 and October 2021 when it failed to:
- have adequate risk management systems,
- has sufficient technological and human resources to provide the services covered by the AFS licence;
- ensures that its representatives are adequately trained,
- retains competence to provide financial services covered by its AFS licence;
- take reasonable steps to ensure that its agents comply with Australian financial services laws and
- does everything necessary to ensure that the financial services covered by the license are provided efficiently, honestly and fairly.
Lanterne operated a “license-for-hire” business model. He authorized more than 60 corporate authorized representatives (CARs) and under them, 205 authorized representatives (ARs). CAR operations operating under Lanterne’s AFSL included:
- venture capital funds,
- managed investment schemes,
- agricultural advisory services,
- wholesale fund management services;
- corporate consulting services,
- real estate wholesale funds,
- energy trading funds,
- digital asset funds and
- climate change advisory services.
In addition to a standard $5,000 down payment per CAR, Lanterne charged each CAR up to $3,000 per month in ongoing monthly fees.
Sentencing, Judge McEvoy said the offenses were serious and systemic.
“…Lanterne’s conduct fell well below the reasonable standard of performance of an AFSL holder, which the public is entitled to expect. She has failed to demonstrate her ability to fulfill her obligations as an AFSL holder and her ability to comply with her applicable statutory obligations,” Judge McEvoy said.
“The real point that must be reflected in the sentence imposed is that these obligations were effectively ignored by Lanterne and as a result end consumers of financial services were exposed to risks that could have been mitigated if there had been compliance with the requirements of s 912A. 1) of the Law. This calls for a significant penalty.”