Sovereign director Michael Grochowski banned by ASIC for breach of financial services laws while investing clients’ monies in property fund

ASIC has banned Michael Grochowski of Hampton, Victoria, from providing financial services for four years in relation to his conduct as a director and officer of Sovereign MF Limited. 

Sovereign MF Limited invested in property assets on behalf of mum and dad investors and self-managed superannuation funds. 

Grochowski was a director and officer of Sovereign MF Limited from May 12, 2003 until his resignation in March 2010. 

Sovereign holds an Australian Financial Services (AFS) licence, which authorises it to operate registered managed investment schemes, including The Sovereign Aged Care Property Fund, whose purpose is to invest retail clients’ money into real property investments. 

ASIC found Grochowski did not comply with financial services laws by failing to ensure all the assets of the fund were properly identified and registered as assets of the fund, resulting in the loss of property assets of the fund. 

He also did not remedy defective disclosure documents for the fund, such that the documents did not contain information about a material change to circumstances affecting property assets of the fund. 

ASIC found he did not provide members of the fund with timely ongoing disclosure about material changes to circumstances affecting property assets of the fund, and the watchdog also said he did not lodge annual financial reports for Sovereign and the fund. 

ASIC also found Grochowski’s conduct as an officer of the company between December 2006 and March 2010 demonstrated a lack of understanding of the obligations imposed on AFS licensees.

ASIC commissioner Greg Tanzer says Grochowski’s banning reflects ASIC’s commitment to raising standards across the financial services industry and shows there are consequences for those who fail to comply with financial services laws.

New directors were appointed to Sovereign in March 2010.

Sovereign continues to hold an AFS licence authorising it to operate its registered managed investment schemes and is addressing issues stemming from conduct prior to the appointment of the new directors. ASIC is not pursuing any action against Sovereign or its current directors in relation to these issues. 

Grochowski has the right to appeal to the Administrative Appeals Tribunal to seek a review of ASIC’s decision.