ASIC action leads to $1.25M penalty imposed on Lanterne Fund Services
Wholesale licensee Lanterne Fund Services Pty Ltd has been ordered to pay a $1.25 million penalty by the Federal Court after it failed to comply with six of the general obligations of Australian financial services (AFS) licence holders.
In proceedings brought by the Australian Securities and Investments Commission (ASIC), the Court found Lanterne breached its AFS licence obligations between March 2019 and October 2021 when it failed to:
- have adequate risk management systems,
- have adequate technological and human resources to provide the services covered by its AFS licence,
- ensure that its representatives were adequately trained,
- maintain the competence to provide financial services covered by its AFS licence,
- take reasonable steps to ensure that its representatives complied with Australian financial services laws, and
- do all things necessary to ensure that the financial services covered by the licence were provided efficiently, honestly and fairly.
Lanterne operated a ‘licensee for hire’ business model. It authorised over 60 corporate authorised representatives (CARs) and under them, 205 authorised representatives (ARs). The businesses of the CARs operating under Lanterne’s AFSL included:
- venture capital funds,
- managed investment schemes,
- agricultural advisory services,
- wholesale funds management services,
- corporate advisory services,
- wholesale property funds,
- energy trading funds,
- digital asset funds, and
- climate change advisory services.
In addition to a typical upfront fee of $5,000 per CAR, Lanterne charged each CAR up to $3,000 per month in ongoing monthly fees.
In handing down the penalty, Justice McEvoy said the contraventions were serious and systemic.
‘…Lanterne’s conduct fell well short of the reasonable standard of performance of an AFSL holder, which the public is entitled to expect. It failed to demonstrate competence in performing its obligations as an AFSL holder and competence in complying with its applicable statutory obligations,’ Justice McEvoy said.
‘The real point which must be reflected in the penalty imposed is that these obligations were effectively ignored by Lanterne and in consequence the ultimate consumers of financial services were exposed to risks which could have been mitigated had there been compliance with the requirements of s 912A(1) of the Act. This requires a substantial penalty.’