Wholesale licensee Lanterne Fund Services Pty Ltd (Lanterne) has been fined $1.25 million by the Federal Court for breaching six general obligations of Australian financial services (AFS) licence holders. Here are the key findings and implications:
Breaches Identified:
- Inadequate risk management systems.
- Insufficient technological and human resources for service provision.
- Lack of training and competence among representatives.
- Failure to ensure compliance with financial services laws.
- Inefficient and unfair provision of financial services.
Business Model Overview:
- Lanterne operated as a ‘licensee for hire’ and authorised over 60 corporate authorised representatives (CARs), under which operated 205 authorised representatives (ARs).
- Services covered various sectors including venture capital, managed investment schemes, and digital asset funds.
ASIC Commissioner’s Remarks:
- Lanterne’s failure to maintain basic risk and compliance management systems posed significant risks to investors.
- Despite charging significant fees, Lanterne lacked adequate infrastructure and personnel to fulfill its obligations.
Admissions by Lanterne:
- Lack of formal risk management systems and compliance processes.
- Reliance on self-reporting by CARs without adequate review or audit processes.
- Insufficient due diligence on representatives.
- Inadequate training and IT infrastructure until September 2020.
Penalty and Further Actions:
- Lanterne fined $1.25 million by the Federal Court.
- Justice McEvoy emphasised the seriousness and systemic nature of the contraventions.
- An independent expert will review Lanterne’s systems and processes, with mandatory implementation of recommendations.
The case underscores the critical importance of robust compliance frameworks and adequate resources for AFS license holders. Investors’ protection hinges on adherence to regulatory standards and diligent oversight. Precision Comply can provide comprehensive compliance solutions tailored to your organisation’s needs, ensuring regulatory compliance and mitigating risk effectively.
