ASIC takes action on Sterling First

The corporate regulator has started court action against Sydney-based company Theta Asset Management and its managing director Robert Marie over Theta's role as responsible entity for one of the main businesses in the collapsed Sterling First property group.

In Federal Court proceedings, the Australian Securities and Investments Commission has alleged Theta (an Australian financial services licencee) and Mr Marie were responsible for authorising the issue of five product disclosure statements (PDSs) for the Sterling Income Trust but failed to ensure each of them was not defective.

In particular, it is alleged that Theta and Mr Marie failed to ensure the PDSs did not contain misleading or deceptive statements; or omissions in respect to statements and information required to be disclosed.

ASIC also alleged multiple failures by Theta that are contrary to the compliance plan that Theta issued for the Sterling Income Trust.

This included a failure to effectively monitor the performance of Sterling Corporate Services Pty Ltd as the investment manager of the Sterling Income Trust and satisfy itself that SCS had carried out its contractual obligations adequately.

ASIC also alleged that Theta failed to effectively manage and control all conflicts of interest.

ASIC said around $16.7 million was raised from retail investors between May 2016 and April 2018, pursuant to the allegedly defective PDSs.

Notably, this included $5 million that was invested after August 2017, when ASIC placed a stop order on three Sterling First PDSs.  The group responded by issuing a revised PDS in October 2017, allowing it to continue raising money.

ASIC said 101 people, mostly retirees and seniors, entered into Sterling New Life Leases – an investment product that was meant to generate a safe and assured income to cover the long-term lease on their homes.

Of these, 63 invested in the Sterling Income Trust to generate funds to cover their rental expenses.

The remaining 38 consumers invested in preference shares offered by companies by the name of 'Silverlink' within the Sterling First group.

ASIC said it was seeking civil penalties against Theta and Mr Marie, and an order banning Mr Marie from managing corporations for such period as the court deems fit.

Theta and Mr Marie could each receive a maximum $200,000 fine.

ASIC said it was currently investigating other entities and officers within the Sterling First group.

The legal action by ASIC comes just weeks after Sterling First entity Rental Management Australia, which had a rent roll of 3,600 properties across Australia, was sold to Yolk Property Group.

In an administrators report earlier this year, Ferrier Hodgson said all other entities in the Sterling First group were not comercially viable in their current form.