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SUBMISSION TO SENATE INQUIRY INTO PERFORMANCE OF AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
The Terms of Reference for this inquiry are wide. My submission focuses on ASIC’s complaints management policies and practices.
As a former financial journalist and a former employee of ASIC’s media unit I make the following observations about the performance and lack of effectiveness of ASIC in relation to its consistent failure to adequately protect, seemingly to care, or bother to take action when small investors and self funded retirees are stripped of their life savings by rogue, incompetent, negligent or fraudulent financial advisors and money managers.
Many of these rogues are licensed by ASIC. The licence enables them to give their clients the false impression that they have the necessary skills to properly advise clients, abide by best practice advice models, keep their clients’ best interests foremost in mind when drawing up client investment plans and to act with honesty and integrity rather than being driven by greed and self interest.
Clients often believe that because the advisor is licensed the advisor has passed some kind of integrity and competence screening process with ASIC and that ASIC has provided a stamp of approval. They couldn’t be more wrong. The licensing process is simply a tick all boxes procedure and regulation of financial advisors and fund managers who invest the money appears to be ineffective.
Over 25 years working as a business and personal finance writer on the Sydney Morning Herald I saw, probed and wrote about dozens of scams that saw hundreds of millions of dollars of retirees’ investments evaporate after rogue operators who gave false and misleading, even fraudulent, assurances of safety for the funds harvested. Instead of being soundly invested, investors’ funds were too often used to fund lavish personal lifestyles of company directors and executives, buy mansions, luxury cars, lent as non recourse loans, underpin high risk projects, property speculation and used to prop up family businesses. Hard earned clients’ life time savings were thus mis-spent, lost, wasted, misused and thieved by a raft of sharks and greedy advisors, most of whom disported their advisory licence on their office wall while at the same time gambling with their clients’ money.
Retirement money was lost in various ways by Westpoint, Storm Financial, Australian Capital Reserve, Fincorp, Lift Capital and Trio Capital. Losses of retiree savings through these vehicles amounted to billions of dollars and the above examples are not exhaustive.
The Westpoint collapse evaporated some $300 million of retirees’ savings. A few years later Storm evaporated ten times that amount. These losses have delivered pain, distress and poverty for thousands of self funded retirees. Many victims of losses are now back at work in their retirement years, or struggling to live on the old age pension. In Storm’s case many investors also lost their homes as the advisors who leveraged investors into the share market also handed the control of retiree’s homes to lenders who proceeded to seize them under their loan and default clauses. Thousands of financially secure retirees who owned their own homes and had retirement savings were thus left without any superannuation and without their own roofs over their heads, renting, living with their children or living in caravans.
OCV
octaviar limited
