E-form issues lead to broker’s ban

Difficulties in filling out an ASIC compliance form were part of a chain of events that caused one broker to be banned

E-form issues lead to broker’s ban



Difficulties in filling out a digital compliance certificate have been revealed as one factor that led to the banning and subsequent licence cancellation of one Victorian mortgage broker.

Former finance broker Meenakshi Devi Callychurn who ran Unique Mortgage Services (UMS) was granted the right to appeal the decision yesterday (5 September) with Judges Rares, Collier and O’Callaghan sending the case to the Administrative Appeals Tribunal to be re-heard.

Callychurn appealed the Tribunal’s original decision in front of Judge Beach but was unsuccessful. One reason the ban was kept in place was that she listed her former business partner as a “fit and proper person” when he was not. This was despite the Australian Securities & Investments Commission (ASIC) conceding she had had difficulties in relaying this information to the regulator through its digital forms.

Callychurn’s former business partner was Rudy Frugtniet who was the sole director of UMS until October 2011 when the Victorian Civil and Administrative Appeals Tribunal (VCAT) disqualified him from practising as a lay associate of a legal practice within the state. He unsuccessfully appealed this decision and became unfit to act as UMS’ director from 12 January 2013.

This put Callychurn in the role of sole director of UMS from October 2011 until April 2015 when she was eventually banned for a number of reasons, including “filing a false or misleading annual compliance certificate” in 2011 and 2012, which still listed Frugtniet as a fit and proper person.

Court documents show, however, that she attempted to notify ASIC of this change but was unsuccessful due to limitations in the digital format.

Because Callychurn entered that Frugtniet ceased to be fit and proper as of 12 January 2013, she was not able to list him amongst individuals who were fit and proper on UMS’ annual compliance date of 24 December 2012.

“That was because the online form automatically deleted his name from that list and would not allow it to be reinserted while his name appeared in the field in the form as that of someone who had ceased to be a fit and proper person,” court documents show.

While the Tribunal originally recognised that the computer issue was “not a circumstance that was created by [Callychurn],” it said she should have adopted “the proper course” and contacted ASIC directly for further assistance.

The Federal Court, however, found two issues with this finding.

“First, there was no evidence before the Tribunal that ‘contacting ASIC’ would have enabled [Callychurn] in some fashion or another to have completed the compliance certificate differently.

“Secondly, as completed, the disputed part of the 2012 compliance certificate … on its face, must be read, as a matter of ordinary language, as asserting that [Frugtniet] was a fit and proper person, and company secretary, during the 2012 year and had only ceased to be so, on 12 January 2013, after that year had concluded.”

Callychurn’s actions therefore did not show that she intended to commit a falsehood for two reasons, the Federal Court said.

“First, she had correctly recorded him as having ceased to be a fit and proper person after the end of the relevant 2012 year for which she made the compliance certificate.”

“Secondly, ASIC knew, or must be taken to have known, of how its own electronic form operated to prevent listing someone in the field for fit and proper persons at the compliance date where that person’s name appeared in the field for persons who had ceased to be fit and proper persons.”

The Federal Court thus permitted a new appeal with the Administrative Appeals Tribunal, ordering ASIC to cover the costs.

Related stories:

Banned broker to appeal court decision

Banned mortgage broker loses appeal

'Unfit' Victorian broker banned by ASIC

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