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Update (15/9/22): The appeals division of the Federal Court has since overturned Mawhinney's ban and remitted the case back to the lower courts. Read more here.
James Mawhinney’s Mayfair 101 Group has been ordered to pay a combined penalty of $30 million for misleading advertising of debenture products - more than double sought by the corporate watchdog.
In handing down the decision, Justice Anderson said the increased penalties were appropriate, noting those sought by the Australian Securities and Investment Commission (ASIC) were insufficient.
“The Defendants deliberately mislead investors into investing in the Mayfair Products under the belief that they would be of low risk when in fact the Mayfair Products were highly speculative and carried very substantial risk,” Justice Anderson said.
His Honour also found that Mr Mawhinney had shown no remorse “for the loss and harm caused to investors in the Mayfair Products”.
The Court also permanently restrained the companies from using certain words and phrases (such as ‘term deposit’ and ‘certainty’) in any future advertising.
It comes after ASIC was successful in Court against Mayfair 101 back in March, with Justice Anderson finding the company’s debenture product advertisements “false, misleading or deceptive”.
The Australian Securities and Investment Commission (ASIC) brought its case against the investment group back in April last year, alleging it represented two debenture products as being term deposits online.
The products, both unsecured promissory notes, were promoted online by a number of Mayfair 101 Group companies, including Mayfair Wealth Partners (trading as Mayfair Platinum), Online Investments (trading as Mayfair 101), M101 Nominees and M101 Holdings.
ASIC claimed when these debenture products were promoted, they would appear as sponsored links on Google AdWords and Bing Ads when a consumer would search for "bank term deposit" or "term deposit" online.
As such, Justice Anderson of the Federal Court found the Mayfair 101 Group misled customers by implying they were comparable and of a similar risk profile to bank term deposits. In actual fact, they were debenture products that exposed investors to significantly higher risk.
Further, the Court found the investment group misled customers by representing that the principal investment would be repaid in full on maturity. Rather, investors might not receive capital repayments on maturity, or at all, as Mayfair could elect to extend the time for repayment for an indefinite period of time.
Today the Court imposed the following penalties against Mayfair 101 companies:
- Mayfair Wealth Partners: $10 million
- M101 Holdings: $8 million
- M101 Nominees: $8 million
- Online Investments: $4 million
James Mawhinney is the director of each of the Mayfair companies. In April 2021, the Federal Court restrained Mr Mawhinney from advertising and raising funds through financial products for 20 years.
“This penalty makes clear that firms must do the right thing by their investors, irrespective of whether they are wholesale or retail investors,” ASIC deputy chair Sarah Court said.
“Failing to accurately advertise financial products can result in significant penalties for firms.”
Mawhinney has vowed to appeal the Court’s decision on penalties, noting ASIC originally sought fines totalling $12 million.
“It is another questionable court decision which we intend on having overturned,” Mawhinney said.
“It is no surprise the court has stood by its original findings. The case on whether we made misleading representations in our advertising was undefended as ASIC had frozen our business activities, making it unfeasible to defend.
“I have instructed Roberts Gray Lawyers to prepare a Notice of Appeal as our prospects of appeal are strong. I look forward to having both cases heard by the Full Court, along with the appeal of my 20-year ban, in May 2022.”
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