The Australian Securities and Investments Commission (ASIC) is suing an Australian law firm for not offering a safe-harbor program to prevent the loss of a client’s investment.
In its lawsuit, ASIC is seeking $30 million in damages for failing to comply with an investment program that would have enabled the firm to withdraw its client’s money from a particular investment account.
ASIC is also seeking damages for a failure to protect clients from a fraudulent transfer that would result in the client’s withdrawal of funds.
ASIC alleges that KPMG LLP failed to disclose to clients that the firm would be withdrawing money from its client accounts from January 1, 2020 to April 15, 2020.
“KPMG advised clients that it had implemented a Safe Harbour program,” ASIC alleges in its complaint.
“However, KPMg advised that clients were not required to undertake any compliance measures.
In fact, it failed to inform clients of any risks associated with any Safe Harbour arrangements,” ASIC’s complaint states.
ASIC says the firm was not informed of its own risks or obligations under the program.
“In response to ASIC’s enquiries, K PMG advised that it was not responsible for the loss and that it could not be liable for the costs associated with withdrawing funds from a Safe Harbor account,” ASIC says in its lawsuit.
ASIC said KPMGs client lost $20 million in the first five months of the program and $25 million in a further five-month period, after it discovered that K PMGs clients were being falsely told that the company was withdrawing funds.
“As a result of the disclosure of the Safe Harbour arrangement, Kpmg clients lost a total of $30,000 in total, and $30K in total in a five-months period,” ASIC states.
“At the time of the alleged fraud, K AMG had not made a profit, but its loss of funds was significant and KPMGS client lost at least $25,000, and K AMGs client was unable to recover any of its lost funds.”
ASIC says KPMGELL failed to provide information to clients about the program that was required by law, including the program’s terms and conditions.
ASIC also alleges that the KPMGA firm was negligent in failing to take reasonable steps to warn clients that their funds would be withdrawn and to provide appropriate and timely notifications of such a withdrawal to clients.
“The conduct alleged is a breach of the Australian securities law, the Code of Practice for Insolvency and Bankruptcy, the Australian Securities Code, the Securities and Exchange Commission Act and other federal, state and local laws,” ASIC charges.
“These breaches, including KPMMG’s failure to provide notice to clients, are also a breach in its obligation under the securities law to inform investors of its obligations to provide them with appropriate and prompt notices of any loss, loss or loss of confidence in the firm.”
ASIC’s lawsuit accuses KPMGC, a law firm in Adelaide, of a breach on several counts.
It alleges that from January 15, 2019 to April 25, 2020, KAMG, KMAG, and others in Australia and abroad failed to adequately inform clients that they could lose money if they invested in a specific investment, the company said.
ASIC alleged that KAMGs clients lost money on a $50,000 investment and $100,000 on a more than $1 million investment, both during the period.
KAMGA also failed to notify clients that its clients were losing money, ASIC alleges.
The lawsuit also alleges the firm’s failure resulted in KPMGM failing to provide “an effective and adequate” response to clients who complained about KPMGG’s alleged conduct.
“By failing to adequately advise its clients of their obligations under Safe Harbour, KAMPG failed to act in good faith and to take all reasonable steps reasonably necessary to ensure that KAMPGS clients’ funds were not lost,” ASIC said.
“It failed to take sufficient steps to detect and address suspicious transfers from its clients’ accounts, and failed to warn its clients that Kampg had made a loss.”
The lawsuit alleges that a total $4.8 million in lost funds was incurred by KAMPGG clients.
ASIC has not named the firm or said if the firm has any existing clients in Australia.
ASIC’s office in Melbourne declined to comment.
ASIC first filed a complaint with the agency in August 2018, alleging that K AMGHG, a firm in Melbourne, failed to promptly inform clients about an investment protection program it was implementing for clients who invested in funds with high levels of risk, including money in a foreign currency, that would be transferred to KAMGB’s account if the client lost.
KAMPGELL and KAMGC both denied ASIC’s allegations in the complaint.
ASIC filed a civil lawsuit against KAMPGB in July 2018.
KPMGTG, the second company in the case, denied ASICs allegations, saying it was unaware of any allegations that KAMS had failed to comply. “We are