21.

Read the case below and answer the three questions relating to this case. All questions here must be answered. Please clearly outline which question you are answering by labelling it as Q21a, Q21b or Q21c.

In October 2021, M. Simpson* was sentenced in the District Court of Victoria to a maximum period of eight years imprisonment for using client funds for his own benefit. Following an investigation by an Australian regulatory authority, M. Simpson, a former financial adviser, was convicted of 10 dishonesty offences under the Corporations Act 2001. The offences were committed when he was the sole director of Simpson and Co. Pty Ltd. He pleaded guilty to all charges. M. Simpson was trusted by his clients to manage their self-managed superannuation accounts. He had almost complete control of his clients superannuation, which allowed him to make transactions on their behalf. Over a period of nearly three years, M. Simpson misappropriated approximately $5 million of his clients funds without their knowledge. He used these funds for his own benefit, such as holidays, rent, paying credit card debts and repaying personal loans. In delivering the sentence, Acting District Court Judge Burns QC found that M. Simpson was a trusted financial adviser, managing funds pretending it was business-like, lawful and profitable. His Honour remarked that M. Simpsons behaviour was deeply stupid but that being stupid is no defence or mitigation.

Q21a) Which of the three Australian regulatory authorities would have been in charge of investigating this incident and bringing the case to court? Once you have identified this regulatory authority, provide a summary of its key functions, meaning that you have two tasks here: identify the regulatory authority AND its key functions. (5 marks)

Q21b) Relating this case to the functions of the regulatory authority in question, outline why investigating this particular case was important for the efficient and sound functioning of the Australian financial system. In your answer, provide key characteristics of an efficient financial system. (5 marks)

Q21c) This case specifically relates to the misappropriation of funds from self-managed superannuation accounts. Define SMSFs outlining their key characteristics? How does this case highlight the drawbacks that SMSFs may have compared to larger super funds? (5 marks)