asic a universal laughing stock?

This article echoes the same message that many investors in Australia have been trying to get recognition of for years!

Claims Australia's reputation in ruins

Jenny Rogers | 10:11am August 20, 2013




THE collapse of Gold Coast-based LM Investment Management has left Australia an international laughing stock, according to a body acting for overseas parties who invested in its funds.

The Advisers Committee for Investors said Australia's "hard man" regulatory image had been hammered by the LMIM collapse, which had highlighted "multiple" failings in the regulatory system.

ACI took aim at the corporate regulator, the funds' administrators, banks and LM founder Peter Drake for failing investors "on several levels".

It said in a statement: "The entire corporate regulatory environment was violated and nobody blinked an eye.

"Foreigners will now look at Aussie boasts of fair play and professionalism as total hogwash and a national embarrassment."

ACI was created by financial advisory firms to represent investors in Europe, the Middle East, South-East Asia and the Far East.

"Their investments were made from hard-earned monies into a G20 nation with a reputation for solid consumer protection and regulatory controls," ACI said.

"In short, they trusted Australia but have been let down.

"From our perspective ... the collapse of LMIM is a body-blow to Australia's image and to its reputation as a well-regulated financial services jurisdiction."

Mr Drake said many of ACI's claims were inaccurate and LMIM was among the "most impeccably run fund managers in Australia". He said he was preparing a detailed response to the claims.

A spokesman for ASIC said its inquiries into the LM group were continuing.

"However, in the area of mortgage schemes, particularly mortgage funds, ASIC has been very active in its oversight and monitoring of conduct and disclosure," the spokesman said.

However, ACI said the fund managers of LMIM, under the control of Mr Drake, made investments and commitments that were "well outside the remit of the companies making the investments".

"Moreover, in broad daylight, they made personal loans to directors with no tangible security and took advances on management fees," it said.

"They presented up-to-the-last-minute internally produced valuations that were pie-in-the-sky by magnitudes and used Australian professionals to support some of these claims. They submitted audited accounts ... upon which investors made their decisions to invest yet only a few months later those same investors are being told that millions have been wiped off their portfolios.

"Where is the proverbial accountability of directors of Australian companies?"

ACI said investors wanted to know how Mr Drake had "managed to secure huge cash and loan advances (about $43 million) that he cannot repay" and why Mr Drake and his co-directors, trustees, responsible entities and auditors "remain untouched".

ACI hit out at administrators from FTI Consulting, for engaging in "lengthy court battles about turf and trying to grab a share of the available fees" at the expense of investors.

ACI labelled Suncorp Metway bank, which held a $22 million first mortgage over LM's Managed Performance Fund, whose flagship investment was the Maddison Estate at Pimpama, as "a bank with no manners which had ignored approaches by investors seeking to refinance the deal".

"The rescue attempts representing investors standing to lose all monies in the Maddison project were treated with contempt and rebuffed," ACI said.

It said ASIC's handling of the LM "saga" was "particularly galling" and the regulator was "caught napping".

"Its subsequent inaction has contributed to the massive losses investors now face," it said.