Principles of the Law of Restitution
Added on 2021-05-31
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FinanceEconomics
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ASIC versusDavid Hobbs [2012] 1Name:Professor:College:Course:City/state:Date:
ASIC versusDavid Hobbs [2012] 2Case Study: ASIC versus David Hobbs [2012] NSWSC 1276Section 1Case introductionStarting in 2002, Hobbs effectively marketed in Australia security shares investment products and services that he had set up in offshore funds. These operations were explicitly described in the Australian Securities and Investments Commission press release of 6 November 2012 (Hjalmarsson, et. al., 2016). Outlined below are the details for the ruling delivered on October 24th2012. In this particular case, David Hobbs targeted and managed Australian investor’s money so effectively that by the year 2009 in excess of $50 million dollars were deposited in the scheme, dealing with fourteen separate investment funds in the following countries Caicos Islands, Hong Kong, United States, Vanuatu, Anguilla, Turks, Bahamas and New Zealand,Mr. David Hobbs was found guilty by the courts to be the architect behind the scheme that effectively controlled all the investors’ funds. The court also found substantial proof of inappropriate payments from the investor’s fund which also included Ponzi payment schemes (Witting, C., 2015). The payments were also done to Mr. Hobbs’ private expenses, his family members and also to others in the scheme administration (McDermott, 2017). Supreme Court found that some Australian depositors had provided wrong information regarding some investment programs during the investors briefing presentation which included the following
ASIC versusDavid Hobbs [2012] 3The Offshore Investments were IllegalDavid Hobbs set up illegal investment funds in Caicos Islands, Hong Kong, United States, Vanuatu, Anguilla, Turks, Bahamas and New Zealand. These investments were ineffectively managed in relation to tax payment evasion, laundering of illegal money, and mainly were used to hide or safeguard illegally gotten funds from law agencies in Australia.The Funds were not Capital GuaranteedThe investment by David Hobbs didn’t shield the investors’ principal capital from losses. The courts also found that they were supposed to invest the clients’ funds in more conservative securities which would have assisted in minimizing the likelihood of investors losing their funds.Investors would get a Return of 4% per MonthDuring the investors briefing Hobbs raised the hopes of the investors by lying to them that he would guarantee a 4% return on investment every month (McDermott, 2017). This projection is very ambitious depending on the calculations and the risk nature of the investment. Unfortunately, Hobbs was unable to deliver on the 4% he had promised. Investments will be recovered on the 60th Day from the 12th MonthHobbs promised a lock-up period of 12 months redeemable after a 60 days’ notice. This was to guard the fund administrators against liquidity issues while the investment was in illiquid investment (Langford and Ramsay, 2014). However, Hobbs was unable to honor the investors when they gave the 60 Days’ notice to redeem their funds.
ASIC versusDavid Hobbs [2012] 4Section 2David Hobbs Breached the Following Duties and ResponsibilitiesAccording to the Corporations Act, the courts have been given powers to prohibit directors, in this case, David Hobbs from managing any corporation if they break the law. The law also takes into account if the accused person has breached the law at least two times. In David Hobbs case the court found him guilty of having breached the following duties and responsibilities.Participation in The Management of Unregistered Investment SchemesThe Supreme Court found David Hobbs to have individually chosen to have discreetly permitted all of the different scheme administrators who included David Collard, Min Hua (Lili) Li, Hui-Min (Nancy) Wu of Stratified, and Brian Wood of Davis town, Jimmy Truong of St John’s Park and Con Koutsoukos and his wife Jacqueline Hobbs of New Zealand. Despite knowing these fund managers were not qualified financial advisers and also t most of the other scheme administrators in his organizations lacked financial knowledge.Provision of Investment Opportunities in Australia must have approval of AFSL authorityTo be eligible to operate an investment opportunity venture in Australia, one must have authorization from AFS authority (Burrows, 2015). The license permits all businesses and their agents to give investment opportunities to investors. David Hobbs was providing the following services without being licensed by AFS•Hobbs gave financial product guidance and information to clients like endorsing to investors and the citizens the financial product they should invest in.
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