What are ASIC banning orders and why do courts make them?
A banning order is one of the strongest tools available to regulators like ASIC. In simple terms, it’s a court order that stops a person from managing companies or being involved in certain types of business activity for a set period of time. The purpose isn’t punishment for its own sake – it’s about protecting the public from future harm where someone has shown they cannot be trusted to operate within the rules.
That was the focus of the Federal Court’s decision in ASIC v McIntyre. The case concerned a series of property-based “land banking” schemes run through multiple companies over a short period of time. Investors were encouraged to pay money for options over proposed lots of land, on the promise that rezoning and development would unlock future value. In reality, the schemes were never registered as managed investment schemes, despite being legally required to be.
Between 2014 and 2015, around $6.6 million was raised from more than 150 investors. Very little of that money was ever recovered. The Court found that the businesses were poorly managed, cash-hungry, and operated without the necessary licences. There was no finding of fraud, but the Court was clear that the level of incompetence, regulatory disregard and investor loss was serious.
ASIC sought, and the Court agreed to, a range of protective orders. The key outcome was that both individuals behind the schemes were banned from managing corporations for 10 years. They were also restrained for 10 years from carrying on any business connected with financial products or financial services, including giving financial advice or holding themselves out as doing so.
Justice Bromwich made it clear why orders of that length were justified. Where large sums of investor money are lost, where there is a pattern of regulatory breaches, and where there is little confidence that the conduct won’t be repeated, the Court’s priority is public protection. Any breach of these banning orders, the Court warned, could amount to contempt and potentially lead to imprisonment.
This case is a reminder that banning orders are not technical or symbolic. They are serious, long-lasting restrictions designed to stop harm before it happens again.
Richard Mitry appeared on Nine this week discussing this decision, and an interesting story that has followed: Video | Facebook