Public Hearing of the Parliamentary Joint Committee on Corporations and Financial Services – August 17, 2018

Following a meeting the MP Steve Irons in January 2018:

Meeting with Steve Irons

Meeting with Steve Irons – update

issues relating to lack of ASIC action in regards to LWP Technologies were raised by Steve Irons at the public hearing of the Parliamentary Joint Committee on Corporations and Financial Services.

August 17, 2018 Public Hearing Transcript

CHAIR: I’ve got some questions for Mr Day, if you’d like to come to the table. Mr Day, I wrote to you earlier this year about an issue which I know is paramount to a lot of mum-and-dad investors around Australia. The type of activity that I wrote to you about was about a particular company called LWP Technologies, and I presented with that letter a raft of evidence that had been submitted to me by several people around Australia who’d been caught up in, potentially, losses we saw through a public company of $47 million. That company still to this day is under suspension—it has been for some time—on the stock exchange. It might be self-imposed, but it’s still under suspension. In your response to me you stated that there were privacy conditions and you couldn’t disclose what the situation was with LWP. Unfortunately, I can’t accept that as an answer, and I think that the mum-and-dad investors and people around Australia need to have confidence in our financial system and that you as, corporate cops on the beat, are prepared to pursue people, particularly the gentleman who was mentioned in a lot of correspondence which I forwarded, a Mr Corbin, who will also be reflected in our franchising inquiry. Can you give an answer to at least—and I know a lot of people are listening to my questions because I told them I was going to ask you, and they’ll be interested to hear your response about what ASIC is doing and where they’re at with it, particularly in relation to the fact that your previous response was inadequate. I’ll pass it over to you, and I might have some more questions depending on your answer.

Mr Day : Yes, we have received information from you. We’ve also received a lot of information in relation to LWP Technologies from a number of other parties, so there’s information there that we’ve been going through. As you point out, LWP’s market capitalisation was $50 million in mid-2015. It went into a trading suspension in August 2017. It’s still in that trading suspension at the moment, and, just before that trading suspension, its market capitalisation was $6 million. A range of issues have been raised with us. Those relate to certain joint ventures and certain technologies that the company was involved with and also the development of new products that were supposedly being developed by LWP as part of that. From the sort of information that’s been provided to us at the moment, the allegations surround things such as insider trading, undisclosed related party transactions, manipulation of the share price, financial reporting irregularities, and misleading statements, certainly regarding research and development claims.

So we have received a lot of information. We’re continuing our inquiries in that respect, and we’re looking at those at the moment. We’re also collecting, as I say, further information, as we need to, about that. We’re not in a position at the moment to give any further information. We don’t really want to talk about that further, as you’d appreciate, for a whole range of reasons. Our surveillance and considerations in matters such as this are confidential. And, again, we have an enforcement guidance note on our website that says why that is. There are a lot of good reasons for that. As I said, this is not a matter that we have, if you like, finalised; this is a matter that we’re still considering at this time. I would like to be able to provide you with more information at the first opportunity, but, at this stage, I don’t think I can.

CHAIR: Considering that they’ve been suspended since August 2017, surely that’s some sort of indication. And there must be some sort of time line that you can give us. What’s the expected response time when you’ll be able to say whether or not you’re going to take any action?

Mr Day : I want to be clear that, in relation to the suspension, that’s a matter for the Australian Stock Exchange. That’s not a matter for us. It’s the Stock Exchange that has put them under suspension.

CHAIR: It’s a flag.

Mr Day : It’s a flag to them, and, obviously, it is a flag to us in some circumstances as well. But, in relation to that, we expect that, within about the next four to six weeks, we’ll be close to completion of our inquiries and consideration of that matter. Certainly by the time we’re here before you again, we will be able to give you an update, but I would hope to be able to provide you with a response in that time frame.

CHAIR: I’ll definitely look forward to that, because, with the amount of money that’s involved for mum-and-dad investors, the question will be: why wouldn’t we pursue this? And I know you can’t answer that, but with these type of activities that I’ve seen, I would say that a good question will be: why won’t we pursue it if we don’t pursue it? 

CHAIR: Mr Day, I have another question which will lead into my colleague’s questioning. You might not be able to answer this but can you update us on the position of the insolvent trading investigations for franchise retail brands. Sean Corbin, Bruce Dwyer and Bill Velkovski, who were all involved in the franchise retail brands, were all subjects of misconduct complaints in relation to LWP Technologies. How can investor and franchise retail brands be expected to make an informed decision to invest when they are not aware of the complaints about LWP? And are the new phoenixing regulations that the government’s introduced going to assist in investors being able to make those informed decisions?

CHAIR: Do you mean in relation to the franchising reforms? Was that were you referring to just then The franchise retail brands?

Mr Day : Yes.

CHAIR: No, I’m talking about the new phoenixing for directors.

Mr Day : The complaints that might exist, they are complaints. Complaints that are made to ASIC are generally kept confidential but we have a guide about when it is that we will make public comment on those things. As at the moment, that’s all they are. That said, in relation to the complaints that might exist, as a matter of public record, there may in fact be a blog that exists in relation to the issues that some people have with Mr Corbin. So I think an open accessible by all the public search could identify those. But our circumstances are that the complaints made to ASIC are not public in that respect. The nature of them certainly is not public and you would understand why there’s value in that. So, in relation to that, I think the answer would be no. We are aware of the other relationships that Mr Corbin has, to other organisations, and those are things that we obviously would be taking into consideration.