Australia’s financial regulator has started legal action against LM Investment Management’s founder, Peter Charles Drake, and former directors, as it seeks financial penalties and banning orders following the collapse of the Gold Coast-based fund manager.

The civil penalty proceedings in the Federal Court of Australia, brought by the Australian Securities and Investments Commission, are against Drake, Francene Maree Mulder, Eghard van der Hoven, Simon Jeremy Tickner, and Lisa Maree Darcy, according to an ASIC statement yesterday.

The watchdog alleges that Drake used his position to gain an advantage for himself and the former directors breached their director’s duties for failing to act with the proper degree of care and diligence regarding transactions involving the LM Managed Performance Fund.

Specifically, ASIC’s action focuses on the conduct of the directors in signing off on a series of loans to Maddison Estate Pty, which Drake owned and controlled, in 2011 and 2012, it said.

MPF loaned funds to Maddison Estate Pty to develop a property development on the Gold Coast known as “Maddison Estate”. Drake was the sole director of Maddison Estate Pty Ltd and the beneficiary of a discretionary trust, managed by another company controlled and owned by him; it held all the beneficial ownership in the company, it continued.

The maximum fine for a director breaching their duties is A$200,000 for each contravention. As well as fines, ASIC also wants to ban Drake and the former directors from managing companies and providing financial services.

The proceedings are listed for a directions hearing in the Federal Court in Brisbane on 25 November 2014.