ASIC found that Equititrust has breached its legal obligations and licence conditions in that it failed to:

• comply with its obligation to maintain at least $5million net tangible assets
• prepare and lodge annual audited financial statements and to provide annual financial reports to members of EIF and EPCIF for the financial year ended 30 June 2011
• lodge compliance plan audits for EIF and EPCIF for the financial year ended 30 June 2011.

Equititrust is the responsible entity of EIF, a registered managed investment scheme whose primary business is lending retail investors’ pooled funds for property development and taking mortgages over the property. Equititrust is also the responsible entity of EPCIF, another registered scheme, which is dormant. These schemes are to be wound up in accordance with orders made in the Supreme Court of Queensland on 21 November 2011.

The suspension of Equititrust’s AFS licence follows earlier action by ASIC to preserve the status quo of the schemes (refer ASIC Media Advisory AD 11-238D ASIC obtains orders against Equititrust Limited for further information).

The suspension of Equititrust’s AFS licence is part of ASIC’s ongoing efforts to improve standards across the financial services industry.

‘The compliance of Australian financial services licensees with their obligations is central to the informed and confident participation of consumers in the financial services markets’, ASIC Chairman, Mr Greg Medcraft, said.

ASIC may revoke the suspension in the event Equititrust meets its legal obligations and licence conditions. Equititrust has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.

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The two schemes are Equititrust Income Fund (EIF) and Equititrust Priority Class Income Fund (EPCIF).

The orders were obtained by consent for the purpose of preserving the status quo of the schemes prior to a hearing by ASIC to consider the suspension of Equititrust’s Australian financial services (AFS) licence and following resolutions made by Equititrust’s Board of Directors on 12 October 2011 that the purposes of EIF could not be accomplished and to take steps to wind up EIF.

The orders obtained by ASIC on 27 October 2011 restrain Equititrust from undertaking various acts regarding its operation of the schemes until 12 December 2011 or earlier order of the Court.

Among other things, in relation to EIF, the orders restrain Equititrust from:

• modifying or replacing the scheme’s constitution
• issuing new interests in the scheme
• redeeming, cancelling or modifying existing members’ interests in the scheme
• dealing with property held or controlled by Equititrust in its capacity as the responsible entity of the scheme or in its own right, other than in the ordinary course of business
• entering into contracts, deeds or agreements regarding any property held or controlled by Equititrust with any person that is a related party or related entity.

The orders in relation to EPCIF restrain Equititrust from issuing new interests in the scheme without first providing written notice to ASIC.

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