ASIC has started proceedings in the NSW Supreme Court, seeking a declaration and orders against Empower Invest Pty Ltd and Newcastle Palais Holdings Pty Ltd (the companies) for breaches of an enforceable undertaking.

ASIC initially investigated allegations the companies, and their respective directors Kenneth Watson and Brien Cornwell (the directors) promoted and operated a managed investment scheme in relation to a property development at Hunter Street, Newcastle (the scheme) without registration and without holding an Australian financial services licence (AFSL).

On 9 May 2008, the court declared, with consent from the companies and the directors (jointly the defendants), that the defendants had operated an unregistered managed investment scheme and carried on a financial services business in relation to the scheme in breach of the Corporations Act 2001 (the Act).

While the defendants complied in part with their undertaking, they failed to repay investors as promised.

Under the powers given to ASIC, in particular section 93AA(3) of the ASIC Act, ASIC may seek an order from the court for a breach of an undertaking. In this case, ASIC has commenced proceedings against the companies to enforce the undertaking with a view to pursuing an appropriate avenue of compensation for the unpaid investors in the scheme.

Further details are available from ASIC.