'Considerable doubt' raised over Provident Capital’s handling of investor funds: Court documents

Provident Capital’s handling of investor funds was called into question by the NSW's federal court judge who ordered that the mortgage fund manager and non-bank lender be placed in the hands of receivers, newly released court document show.

Justice Steven Rares said there was "considerable doubt over Provident Capital's integrity to obtain, manage or hold money from the public" as part of his June 29 judgement,where he appointed PPB Advisory as receivers.

He also said he was “not impressed by [Provident boss Michael] O’Sullivan’s evidence generally where it conflicted with other evidence”.

Rares said it was  “not accidental” that O’Sullivan did not disclose in his affidavit evidence Provident’s withdrawal of its application to ASIC for the new PDS (public disclosure statement) in respect of the monthly income fund and an Australian Financial Services licence application made on May 2.

The details of the licence application under the name of Provident Funds Management Australia Ltd – to be controlled by O’Sullivan – was only made known to Australian Executor Trustees Ltd, representing Provident debenture holders, on June 28 in court statements.

Rares said O’Sullivan  engaged in "a pre-emptive strategy to avoid the consequences of any receivership" by seeking an authority for an Australian Financial Services Licence for a related company on May 2 that was to take over as the responsible entity for Provident's main funds.

“I do not consider that he had been candid with the court in relation to the withdrawal of the PDS for the monthly income fund or with respect to his failure to reveal the application for the licence.

“The failure of Provident to disclose to the court the withdrawal of the PDS and the application by its related company for the licence casts considerable doubt over Provident’s integrity to obtain, manage or hold money from the public.

“Those matters were obviously relevant to the present application," Rares said.

The documents also reveal that on May 9 ASIC had issued notices to Provident expressing concern about the accuracy of  Provident ’s assertions of its “proud track record of consistently meeting our investment objective, providing a monthly income in the top 25% of all Australian retail mortgage funds based on returns for one year and continually meeting this objective since August 2010".

More than 3,000 investors in debentures are owed $125 million. All mortgage funds operated by Provident have been frozen.

A meeting of debenture holders is due to be hold in the second week of August.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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