Managing director of private equity company Mayfair 101, James Mawhinney, is calling for a Senate Inquiry into the Australian Securities and Investments Commission’s actions against his investment business, following media reports of how the investigation was initiated.
On 30 and 31 July 2023 The Australian newspaper published articles identifying a conspiratorial email about Mayfair, sent directly from short-seller John Hempton to Deputy Chair of ASIC, Karen Chester, which triggered a damaging sequence of events.
ASIC commenced its first investigation of Mayfair on 29 January 2020, and within seven weeks the regulator initiated enforcement action which triggered a further 19 legal proceedings, insolvency practitioners to be appointed to 40 Mayfair entities, the derailment of Mayfair’s $1.6 billion Dunk Island redevelopment project, and more than half a billion dollars’ worth of damage.
The email from Mr Hempton – the founder of fund management company Bronte Capital – was sent on November 27, 2019, which just hours later triggered ASIC’s head of Investment Managers, Rhys Bollen, to draft a proposed ‘Public Warning Notice’ against Mayfair 101.
Email from John Hempton to Karen Chester
At the time of Mr Hempton’s email Mayfair had 570 lenders, mostly retirees, who had subscribed to $211 million of debt instruments. Mayfair at this time had no ASIC or AFCA complaints, all lenders were paid up to date and on time, the group had obtained formal legal review of its advertising, and the group held a diversified portfolio of more than twenty-five private equity investments in ten countries.
The article in The Australian confirms that several former ASIC executives “were concerned over the speed with which the Mayfair investigation was expected to be carried out” under the direction of Ms Chester and that the unusually fast escalation of the investigation “raised eyebrows within the ASIC executive”.
ASIC normally seeks corrective action from industry participants when it has concerns about advertising of financial products and services, but this opportunity was never afforded to Mayfair.
In the ASIC 28 November 2019 correspondence referred to by The Australian, a Senior Manager from ASIC’s Brisbane office questioned the escalation, asking, “I know we are thinking about a consumer warning. Just as effective may be something in the market confirming we are making inquiries into it given the marketing. I wonder whether this could be achieved more easily than coming up with a formal warning?”
The Australian’s story also confirmed that “thousands of messages” were exchanged on an encrypted chat service between Mr Hempton and ASIC’s Deputy Chair Karen Chester, who are friends and former colleagues at the Department of Treasury.
Mr Mawhinney said The Australian had uncovered the mystery of how the corporate regulator acted so precipitously against Mayfair.
“Our suspicions have been confirmed that ASIC’s investigation into Mayfair 101 was prompted by an unsubstantiated conspiracy theory which ASIC failed to verify,” said Mr Mawhinney.
“After three and a half years, numerous legal proceedings, and tens of thousands of pages of court documents, the only document resembling a complaint about Mayfair is Mr Hempton’s “spidey-sense” email he sent Karen Chester.”
“I am calling on the Senate Economics Committee to investigate ASIC’s handling of Mayfair, which should include disclosing all communications between Mr Hempton and Ms Chester. It seems a conspiratorial email has influenced ASIC’s actions when clearly Mr Hempton is a participant in the same financial services market as Mayfair 101 and is therefore conflicted.”
John Hempton’s Twitter posts directed to Mayfair 101 Managing Director, James Mawhinney
Timeline
27 Nov 2019 7:46pm John Hempton emails Karen Chester about an ASX-listed company (Regal Funds Management).
Included in the email is a “PS” containing speculative thoughts about Mayfair (above).
28 Nov 2019 9:14am
Mr Hempton’s email is forwarded to various ASIC staff.
A Senior Manager suggests a public warning notice might be too harsh.
At the time ASIC had requested no documents from Mayfair.
28 Nov 2019 11:34am
Rhys Bollen (head of Investment Managers) drafts a Public Warning Notice. The notice states:
“ASIC is looking into the activities of the Mayfair group, including through the service of formal statutory notices for information.
Investors should be aware that investments in the products offered by Mayfair group are inherently risky. For, example we are aware of a recent offer of a fixed interest product from the group offering 5.4% pa (source: AFR, date, page). In the current environment where the RBA cash rate is 0.75% and average 1 year terms deposit rate is 1.25% (source: RBA), a product offering 5.4% is by definition high risk.
While we understand that the Mayfair Group’s products are only being offered to wholesale clients, some consumers with an recent superannuation payout, redundancy payout or inheritance could qualify under the current definition of wholesale client.”
[emphasis added]
2 Dec 2019 12:51pm
An internal ASIC email to Phillip Mines states “Pressure is on to do something”.
5 Dec 2019
ASIC issues a s912(c) notice to Mayfair’s AFSL provider asking for marketing documents and bank statements.
The notice did not ask for financial statements or information on Mayfair’s underlying investments.
9 Dec 2019 ASIC issues a s33 notice to Mayfair Wealth Partners Pty Ltd (the first ever notice issued by ASIC about Mayfair’s note products). The notice did not request financial statements or information on Mayfair’s underlying investments.
29 Dec 2020
ASIC opens an official investigation (the first ever investigation into Mayfair).
29 Dec 2020
IPO Wealth Fund trustee (Craig Dunstan) writes to Mr Mawhinney:
“Just to advise that I have been requested to attend a meeting with about 6 people from ASIC today to discuss IPO Wealth and Mayfair.”
Mr Mawhinney was not invited to the meeting nor advised of what was discussed at the meeting. It is unclear what was agreed between Mr Dunstan and ASIC. Mr Dunstan appointed subsequently receivers over the IPO Wealth Holdings division of Mayfair on 22 May 2020.
11 Mar 2020 World Health Organisation declares COVID-19 a global pandemic.
Mayfair suspends redemptions temporarily to manage the onset of the pandemic.
13 Mar 2020
ASIC writes to Mayfair informing that ASIC intends on publishing a Public Warning Notice naming Mayfair, IPO Wealth and James Mawhinney.
17 Mar 2020
Mayfair’s lawyers write to ASIC in response to the notice stating:
The Notice comprises the first occasion in which ASIC has alleged that our clients’ products are ‘high risk’. That allegation has been made without ASIC having previously sought or obtained (amongst other things) details of our clients’ underlying financial position. In those circumstances, the short timeframe proposed for our clients’ comments is unreasonable and, by this letter, we ask for a more reasonable period within which to respond...
19 March 2020
Mayfair lawyers informs ASIC that Mayfair is "being denied procedural fairness".
Note: two and a half years later the Full Bench of the Full Court found ASIC denied Mr Mawhinney procedural fairness.
21 Mar 2020
Mayfair applies for an injunction to stop publication of the notice.
26 Mar 2020
Justice Beech orders injunction against publication of the notice.
3 Apr 2020
ASIC changes its strategy due to the injunction and issues proceeding VID228/2020 alleging misleading or deceptive advertising of the M+ and M Core notes.
16 Apr 2020
ASIC awarded injunctions disallowing marketing of the notes.
13 Aug 2020
ASIC issues proceeding VID524/2020 to apply to wind up M101 Nominees Pty Ltd. Obtains interim fundraising injunctions, asset freezing orders and international travel ban against Mr Mawhinney.
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