Endeavour Securities (Australia) and Linchpin Capital Group - Case Update

The Full Court of the Federal Court has upheld a decision ordering an individual who was never formally appointed as a director to pay $150,000 in penalties in connection with his involvement in a $17 million investment scheme that collapsed into liquidation in 2019.

Endeavour Securities was the responsible entity of the Investport Income Opportunity Fund, a registered managed investment scheme. Endeavour was acquired by Linchpin Capital in 2014. Linchpin was also the trustee of an unregistered managed investment scheme which bore the same name. The purpose of having a common name for both schemes, Investport Income Opportunity Fund, was to make them appear to the public to be the same fund.

Endeavour raised about $17.3 million in the registered scheme from 131 investors. About $16.5 million of the funds were transferred to Linchpin as trustee of the unregistered scheme. Linchpin then made loans — including intercompany loans and director loans — of over $20 million.

The funds were both placed in liquidation in 2019 and ASIC sought pecuniary penalties and disqualification orders against four individuals, including Peter Daly (who was a director of Linchpin but not Endeavour), for breaching their duties as officers of a responsible entity of a registered investment scheme and acting not in the best interests of members. The primary judge found that Mr Daly acted as an officer of Endeavour and ordered that he pay a $150,000 penalty and be disqualified from managing corporations for five years.

Mr Daly appealed on the basis that he was not an officer of Endeavour. The Full Court of the Federal Court was not persuaded, finding that Mr Daly was a member of the Investment Committee which set the fundamental business strategy for the registered scheme. Mr Daly participated in making decisions that affected the whole, or a substantial part, of the business of Endeavour (including approving Endeavour’s accounts), and had the capacity to affect significantly Endeavour’s financial standing. Mr Daly was therefore an officer of Endeavour.

The Full Court also upheld the penalty and period of disqualification ordered by the primary judge as being well within the range of reasonable decisions.

Read the decision HERE.

Professionals involved:

• Counsel for ASIC: Matthew Brady KC of Higgins Chambers and Lee Clark of North Quarter Lane Chambers

• Solicitor for ASIC: Gadens

• Counsel for Mr Daly: Fiona McLeod AO SC and Laura Keily

• Solicitor for Mr Daly: Ten Four Law

• Liquidators: Jason Tracy and David Orr of Deloitte