ASIC issues civil penalty proceedings against wholesale licensee Lanterne Fund Services for risk and compliance failures

ASIC has commenced civil penalty proceedings in the Federal Court against Lanterne Fund Services Pty Ltd (Lanterne) alleging multiple failures to meet the obligations of its Australian financial services licence, including a failure to meet organisational competence requirements.

ASIC also alleges that Lanterne, under a ‘licensee for hire’ business model, failed to have adequate risk management systems and resources, including financial, technological and human resources, to carry out its supervisory arrangements.

ASIC Deputy Chair Sarah Court said, ‘ASIC is concerned that for an extended period there was a real risk of investor harm due to shortcomings in Lanterne’s systems and processes.

‘Despite Lanterne’s authorised representatives operating under its licence being responsible for over $1 billion in funds and collectively paying monthly fees of around $180,000 to Lanterne during this period, it appears to ASIC that Lanterne operated a wholly deficient business, with no compliance staff and almost no risk management processes in place.’

ASIC alleges that Lanterne failed to:

  • have in place adequate risk management systems,
  • have adequate resources (including financial, technological, and human resources) to provide the financial services and carry out supervisory arrangements,
  • maintain competence to provide its financial services,
  • ensure that its representatives were adequately trained,
  • take steps to ensure that its representatives complied with the financial services laws, and
  • do all things necessary ensure that the financial services were provided efficiently, honestly, and fairly.

‘ASIC expects all wholesale licensees to reduce risk by ensuring their businesses develop, implement and maintain robust risk and compliance procedures. As today’s action demonstrates, when ASIC sees a business it considers to have deficient risk management processes, we will look to take action’, concluded Ms Court.

ASIC is seeking declarations and pecuniary penalties from the Court. ASIC also seeks orders that an independent expert be appointed to review and report on Lanterne’s systems, processes and controls, and that Lanterne then implement a risk management and compliance program once the report is received.

The date for the first case management hearing is yet to be scheduled by the Court. 

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