Two former directors of the failed Sydney securities dealing company, Australian Investors Forum Pty Limited (AIF) have been ordered to pay $3.6million in compensation to AIF and related companies. Mr Dennis Ralph Anthony and Mr Martin Lloyd-Cocks were also disqualified from managing corporations for 25 years.

The Supreme Court of New South Wales made the orders following civil proceedings brought by the Australian Securities and Investments Commission (ASIC). The Court found that Mr Anthony, of Wollongong in NSW and also a resident of the Philippines, and Mr Lloyd-Cocks of Darling Point, NSW, contravened numerous provisions of the Corporations Act 2001 (the Act), relating to their roles as directors of AIF and related companies.

The Court found that the conduct of Mr Anthony and Mr Lloyd-Cocks fell into the worst category of conduct and that they should never again be allowed to manage corporations as the risk to the public was too great.

‘The community expects and deserves directors who act honestly and with integrity and we will not shy away from pursuing those directors that pose a threat to the investing public’, ASIC’s Executive Director, Enforcement, Ms Jan Redfern said.

ASIC commenced proceedings against AIF and related companies in October 2001, following concerns that AIF had offered securities without a disclosure document and that its directors had breached their duties to AIF, and to the related companies.

AIF was a licensed securities dealer which ran an investment club, offering members placements in new company floats. Between the commencement of AIF’s business in May 1999 and October 2001, AIF received approximately $7.8 million in ‘membership fees’, corporate finance fees or subscriptions for its own shares or shares in initial public offerings (IPOs). Of that sum, approximately $3.2 million was paid to companies controlled by Mr Anthony, Mr Lloyd-Cocks, and another director, Mr Dominic Luvara. Included in this sum were amounts totalling $2.708 million, paid to a Panamanian company controlled by Mr Anthony.

AIF was wound up by the Court in August 2002, and Mr Alex MacIntosh was appointed liquidator. Twelve other related companies were subsequently wound up or deregistered.

On 4 April 2005 the Court found that Mr Anthony and Mr Lloyd-Cocks:

• failed in their duty to exercise care and diligence;
• failed in their duty to exercise good faith; and
• improperly used their positions.

The Court further found that Mr Anthony had illegally engaged in the management of AIF and related companies, whilst he was an undischarged bankrupt, and therefore, prohibited from managing corporations.

The Court also found that:

• AIF offered securities without a disclosure document, and that Mr Lloyd-Cocks was knowingly involved in that contravention;
• one of the related public companies, Sage Global Fund Limited (now Praetorian Capital Limited), failed to obtain approval from its shareholders relating to payments made to related companies in contravention of the Act, and that both Mr Anthony and Mr Lloyd-Cocks were knowingly involved in that contravention; and
• AIF contravened a condition of its dealers’ licence by holding clients’ money on trust, and that Mr Lloyd-Cocks was knowingly involved in that contravention.

ASIC has previously settled its proceedings against other co-defendants Mr Bud Shaheen, Mr Peter Topperwien and Mr Luvara, each providing undertakings to the Court not to manage corporations for two, two and ten years respectively. Mr Topperwien and Mr Luvara also undertook to pay $50,000 and $230,000 respectively to the liquidators of AIF. Mr Luvara has also agreed to pay $70,000 to the Trustee of AIF Strategic Trust.