ASIC target Mayfair 101 turns to property bonds to tap into investor cash, promoting a 5.95% return

With its Dunk Island dream under a cloud, ASIC target Mayfair 101 has tapped investors with a new property scheme.

The email, seen by The Australian, said investors could earn 5.95 per cent annually.

A company under investigation from the corporate regulator has started quietly marketing property bonds.

Several high net worth investors were surprised to receive emails from Australian Property Bonds this week and read in the fine print that it was a company of Mayfair 101, which is the subject of an Australian Securities & Investments Commission investigation and various court orders.

The email was sent 1½ weeks after the Victorian Supreme Court ordered Mayfair 101’s IPO Wealth Holdings unit into liquidation.

The email, seen by The Australian, said investors could earn 5.95 per cent annually.

“Australian Property Bonds are a fixed income solution for investors seeking the security of first mortgage support, a competitive return while official interest rates are at historic lows, and the option of monthly distributions or capitalised returns,” the email said.

“To celebrate the new financial year we are providing qualified ­investors the opportunity to earn 5.95 per cent per annum (our standard 18 month rate) by investing in our six, 12 or 60 month investment options.”

Further down in the fine print, the email revealed that Australian Property Bonds was “a member of the Mayfair 101 Group of companies”, was not regulated by the Australian Prudential Regulation Authority and carried a higher risk than investing in a bank.

“Australian Property Bonds is not a bank, and nor are any of the companies in the Mayfair 101 Group,” the email said.

“Therefore, the Mayfair 101 Group is not regulated by APRA and investment in its products is not covered by the Australian Government’s Financial Claims Scheme, colloquially known as the ‘Government Bank Guarantee’ which covers deposits up to $250,000 per depositor, per bank.

“As with all investment products, there are risks in investing in the Mayfair 101 Group’s products. Investing in the products offered by the Mayfair 101 Group is not the same as depositing money in a term deposit offered by a bank. Investing in Mayfair 101 Group products has a higher level of risk compared to investing in a bank term deposit.”

Earlier this year, ASIC accused Mayfair 101 of producing misleading or deceptive advertisements after its debenture products appeared as sponsored links under online searches for “bank term ­deposit” or “term deposit”.

ASIC alleged Mayfair 101 made statements that were false, misleading or deceptive by representing that its debenture products were comparable to bank term ­deposits, and had similar risk profiles to bank term deposits, when they were debentures with significantly higher risk profiles.

The regulator also took issue with Mayfair 101 stating that the principal investment would be repaid in full on maturity, because investors might not receive capital repayments on maturity or at all, and because Mayfair could elect to extend the time for repayment for an indefinite period.

The Federal Court ordered in April that all Mayfair 101 companies had to provide potential investors with a series of disclaimers, including that it was not regulated by APRA and that investing in its products was risky.

The court also banned Mayfair 101 companies from using the following phrases in its advertising: term deposit, bank deposit, capital growth, certainty, fixed term, and term investment.

Early this month the Victorian Supreme Court ordered Mayfair 101’s IPO Wealth Holdings unit into provisional liquidation, a move which could threaten its dreams of reviving Queensland tourism icon Dunk Island.

The failed subsidiary controls stakes in companies that were destined to float and is separate from Mayfair’s high-profile $1.6bn plans to redevelop Dunk Island and Mission Beach into a tourism mecca, but it will cast a shadow over these plans.

Following the Supreme Court order, Mayfair 101 Group managing director James Mawhinney said: “Moving forward, we will be co-operating with the provisional liquidators to ensure that the ­return to IPO Wealth’s unit-holders is maximised under the circumstances.”