Spruiker in Sonray gets ban

A FORMER property spruiker who authorised the founder of failed broker Sonray to act as his representative has been banned from providing financial advice for four years.

By InvestSMART · 8 Nov 2011

By InvestSMART ·
8 Nov 2011

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A FORMER property spruiker who authorised the founder of failed broker Sonray to act as his representative has been banned from providing financial advice for four years.

The Australian Securities and Investments Commission said its investigation found Rory Deutsch, of Box Hill North, failed to comply with financial services laws between April 2008 and the end of April this year and "there may be reason to believe that he would not comply with financial services law in the future".

ASIC said that through his company, Romad Financial Services, Mr Deutsch sold stakes in two managed investment schemes despite lacking a licence to do so and marketed the schemes in a misleading or deceptive way.

Mr Deutsch has the right to appeal against ASIC's decision to the Administrative Appeals Tribunal.

In February, Romad gained approval to make Sonray founder Russell Johnson an authorised representative through his private company, RJ Capital.

ASIC revoked Johnson's authorisation on August 1, at his request, and in September he was charged with 24 offences over Sonray's collapse, including theft and false accounting. His case returns to court next month.

Mr Deutsch had been the "key person" responsible for Romad's licence since 2004, ASIC said.

AAT records show he was an "enthusiastic" supporter of investment in Norm Carey's Westpoint, one of Australia's most spectacular property flops, when he was compliance and technical manager of another financial services company, Glenhurst.

ASIC convinced the Victorian Supreme Court to wind up Business Strategies No 5, a retirement village company of which Mr Deutsch was a director, in 2007.

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Frequently Asked Questions about this Article…

What was the outcome of the ASIC investigation into Rory Deutsch and why was he banned?

ASIC found Rory Deutsch failed to comply with financial services laws (between April 2008 and the end of April this year) and banned him from providing financial advice for four years. The regulator said Deutsch, through his company Romad Financial Services, sold stakes in two managed investment schemes without a licence and marketed those schemes in a misleading or deceptive way.

How did Romad Financial Services factor into the ASIC action against Rory Deutsch?

Romad Financial Services was Deutsch’s company through which ASIC says he sold stakes in two managed investment schemes despite lacking a licence. ASIC also recorded that Deutsch had been the 'key person' responsible for Romad’s licence since 2004.

What connection did Romad make between Russel(l) Johnson (Sonray founder) and authorised representation?

In February Romad gained approval to make Sonray founder Russell Johnson an authorised representative through Johnson’s private company, RJ Capital. ASIC later revoked Johnson’s authorisation on August 1 at his request.

What charges has Sonray founder Russell Johnson faced following the Sonray collapse?

In September Russell Johnson was charged with 24 offences relating to Sonray’s collapse, including theft and false accounting. According to the article, his case is due to return to court next month.

Does Rory Deutsch have any right to appeal ASIC’s ban?

Yes. The article says Mr Deutsch has the right to appeal ASIC’s decision to the Administrative Appeals Tribunal (AAT).

Did the article mention any previous controversies involving Rory Deutsch?

Yes. AAT records cited in the article show Deutsch was an 'enthusiastic' supporter of investment in Norm Carey’s Westpoint while he was compliance and technical manager at another firm, Glenhurst. The article also notes ASIC convinced the Victorian Supreme Court to wind up Business Strategies No 5, a retirement village company of which Deutsch was a director, in 2007.

What does it mean that an authorised representative was revoked, and why should investors care?

The article shows that an authorised representative can be approved to act through a company (Romad approved Russell Johnson via RJ Capital) and can later have that authorisation revoked (ASIC revoked Johnson’s on August 1). For investors, that sequence highlights that who is authorised to represent a financial business matters because authorisations can be removed if issues arise.

What practical warning signs for everyday investors does the Sonray/Romad case highlight?

Based on the article, red flags include: people or firms selling stakes in managed investment schemes without an appropriate licence, marketing that may be misleading or deceptive, authorised representatives being revoked, and links to previously failed or wound-up projects (for example Westpoint and Business Strategies No 5). These are signals investors may want to investigate further when assessing advisers or investment offers.