The corporate watchdog has issued a warning to Australian companies about dealing with a company director who has been convicted and imprisoned in the US on banking fraud offences.
Yesterday the Australian Securities and Investment Commission removed New Zealand born Shaun Gregory Morgan as a director from eight Australian companies, including Australian Capital Investment Group, citing concerns he may be approaching Australian companies offering financial services despite being banned from doing so.
Sign up for SmartCompany newsletter.
Free to your inbox every weekday
According to ASIC, Morgan has been automatically banned from managing a corporation under the Corporations Act because of his US criminal convictions but he is allegedly still approaching ASX-listed companies that are seeking to raise capital.
After approaching the companies Morgan has allegedly requested an “advance fee” in exchange for helping find ways to raise capital.
ASIC Commissioner John Price yesterday issued a warning to any Australian companies approached by the director.
“Due to Mr Morgan’s unlicensed status and criminal history, ASIC strongly advises companies seeking to raise capital as well as other financial consumers to avoid dealing with him or companies associated with him,” Price said in a statement.
It is not the first time Morgan has drawn the ire of the watchdog, with ASIC having issued a warning in February for the public to avoid dealing with unlicensed financial services he allegedly offered through various websites.
As a result of his US conviction, Morgan was permanently banned from providing financial services in Australia in June.
Ian Ramsey, professor of commercial law at Melbourne University, told SmartCompany the case is unusual as the alleged conduct appears to be continuing despite enforcement action.
But for Ramsay, given the series of enforcement orders against Morgan this year, ASIC’s recent action is not surprising.
“ASIC does have power under corporate law to ban someone of being a company director when they’re convicted of something in foreign country,” he says.
Ramsay says while the series of actions resulting in the recent ASIC ban represents a “very powerful sanction”, there are questions about whether it would be sufficient.
“The order in June this year might have been sufficient, but clearly not…even though Morgan is overseas it is alleged he has continued to offer finance services,” he says.
“There must be a real prospect this (current order) won’t be sufficient, because he’s already breached previous orders.
“There’s the question about what ASIC can do in these circumstances.”
Ramsay says if ASIC has sufficient evidence and co-operation from international authorities, it could potentially initiate criminal proceedings against Morgan and possibly extradite him to come back to Australia.
“Regulators will have memorandums of understanding with many regulators overseas, aimed at facilitating enforcement for actions that allegedly breach law which cross over borders,” he says.
Ramsay says also raises concerns about the importance of undertaking due diligence when dealing with financial services companies.
“Before your company pays an advance fee, you really need to do due diligence to ensure you are dealing with someone that is credible and that that person or organisation has a successful track record of raising capital for other companies,” he says.
SmartCompany contacted Shaun Morgan and Australian Capital Investment Group but did not receive a response prior to publication.