tricom opes lift : whos next

As giants start to wobble, investors wonder who's nextFont Size: Decrease Increase Print Page: Print SHAREHOLDER: Stuart Wilson | April 15, 2008
THE continuing Opes Prime soap opera drives home the truth that a small tear in the fabric of investor confidence can quickly develop into widespread and genuine concern about the operation of the market.

Two firms hitting financial turbulence is an unfortunate coincidence. Three is a trend. With Tricom, Opes Prime and Lift Capital all in difficulty, the obvious question becomes, "Who's next?".

One more failure will prompt more serious quandaries such as "When will it stop?" and "Do I have beneficial ownership of my shares?".

It is all too easy to point one's finger at the regulators over these failures, but identifying alleged irregularities between marketing paraphernalia and contract fine print is always going to be a relatively simple task when one actually knows what to look for.

It's unlikely a prospective Opes Prime client lodged a complaint for the regulator to investigate. One of the casualties of this mess is the Australian Securities Exchange. Conversation around the barbeque now centres on the new risks, both real and perceived, of share investing.

Comparatively, property investment has begun to appear to be a safer option in many respects, which will no doubt leave dodgy spruikers licking their chops. Not only do those investors, who were clients of Lift Capital and Opes Prime lose out, but the shareholders in companies whose shares are being dumped on the market.

Seeing ANZ appear as a major shareholder on the company register is now akin to share market leprosy.

This latest crisis of confidence comes on the back of an already depressed market, disclosure malpractice and a short selling epidemic. Surely the ASX cannot remain idle and watch investors desert the market. After all, if trade volumes fall, so does the profitability of the ASX.

In the US, many systemic shocks are dealt with by way of arrangements with the Securities Exchange Commission.

Bailing out distressed firms is not unheard of, nor is extending financial support to assist in an orderly takeover.

The name of the game for regulators is system stability, and sometimes the blunt nature of markets upsets the applecart.

Even if the National Guarantee Fund does not cover Opes Prime clients, consideration should have automatically been given to an orderly bailout.

Similarly, even though Lift Capital may not even be a licensed ASX participant, both ASX and ASIC should be looking at mechanisms that protect both those companies' clients and market integrity.

Monetarily, it would be a costly exercise. Do investors who did not read the fine print of a contract deserve that level of protection -- especially ones whose first reaction is to employ notorious underworld figures to attempt to recover funds?

With rising numbers of stories about clients who claim to have been fundamentally misled, as well as significant amounts of missing money, a US-style bailout appears to be an extreme option but should not be dismissed completely out of hand.

Stuart Wilson is chief executive officer of the Australian Shareholders' Association.