Yesterday ASIC flagged that civil penalty proceedings have commenced in the Federal Court of Australia in Melbourne against Patrick John Godfrey, former managing director of Banksia Securities Limited (In Liquidation). Banksia, based in Kyabram in country Victoria, was an unlisted public company involved in raising money from the public by issuing debentures and lending the funds raised to borrowers for property investment and development purposes. It  became unstuck when a large loan to a large developer should have been classed as a bad debt.ASIC alleges that Banksia's financial reports for the financial years ending 30 June 2011 and 30 June 2012, and the half-year financial report for the half year ending 31 December 2011 "did not comply with the relevant accounting standards, nor did they give a true and fair view of the financial position and performance of Banksia."ASIC also alleges that "Godfrey did not have a proper understanding of the accounting standard, AASB 139, dealing with Financial Instruments: Recognition and Measurement."ASIC has therefore reasoned that Godfrey calculated and approved the impairment of receivables for Banksia and, as a consequence, Banksia's financial reports failed to give a true and fair view of Banksia's financial position. "ASIC is seeking declarations from the Court that Mr Godfrey contravened section 344(1) of the Corporations Act. ASIC also seeks orders for the imposition of a pecuniary penalty upon Mr Godfrey and for his disqualification from managing corporations."The Federal Court will hear the matter at 10.15am on 3 August 2017.