IN SUMMARY:
A six and a half year ASIC ban on an unlicensed property investment scheme promoter serves as a very sharp reminder of the serious consequences of offering investments without an AFSL.
In the lead up to the end of 2024, ASIC was making clear its intention to hone in on unlicensed property investment schemes (see here). There have been a number of recent examples of enforcement activities against unlicensed property scheme promoters, including the $1.25 million penalty levied against notorious investment scheme promoter Sasha Hopkins in late November 2024 (see here).
It seems the regulator is continuing to make-good on its promises – it has now banned NSW property developer Andrew Bodnar from being involved in any financial services for six and a half years, for offering investments in property development projects without an AFSL (Australian Financial Services Licence).
This yet again serves as a very sharp reminder of the serious consequences of offering investments without an AFSL.
KINGDOM DEVELOPMENTS GROUP
Those who follow the world of enforcement action against property scheme promoters could be forgiven for describing this as a somewhat familiar tale. Mr Bodnar’s Kingdom Developments was a group of companies which carried out property developments in five States, through special-purpose company structures. Investment was offered in the projects, via the issue of securities in the companies.
ASIC found that the investments were financial products, yet none of the Kingdom Developments Group companies, nor Mr Bodnar, held an AFSL.
The Group collapsed, and Mr Bodnar was also declared bankrupt; with a report from the bankruptcy trustee showing creditors were owed $131 million.
ASIC’S BAN
ASIC banned Mr Bodnar for six and a half years, after finding that not only did the Group not hold an AFSL, but:
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- Mr Bodnar was involved in offering securities without the required disclosure document under the Corporations Act, and
- Mr Bodnar was involved in misleading and deceptive conduct regarding the use and repayment of investor funds.
ANOTHER REMINDER OF THE CONSEQUENCES OF UNLICENSED CONDUCT
It is clear that ASIC remains focused on unlicensed fund raising and investment offers, for good reason.
There is a lot of misunderstanding around when an AFSL is needed, and around so-called ‘exemptions’ from the licensing and disclosure requirements under the Corporations Act (read more in our blog “Do I need an AFSL if I raise money?“).
As we have written about a number of times – not only do you almost always need an AFSL to raise money from investors, you also commonly need an AFSL to promote most types of financial investments, including investments in property trusts or property development projects.
Ensure that your clients do not become targets of ASIC’s ongoing focus – talk to specialists who understand the ins and outs of fundraising for property projects.
