Melbourne Cup of LIC's, page-6

I think the LIC industry is like any other industry: you get some good apples and some bad apples.

I think the regulatory and legal systems are broken:
When bad apples such as these can run this type of operation so brazenly and not have any intervention from regulators or law enforcement despite the number of complaints from investors ;
When the Takeovers Panel can make orders, only for the Pirates to brazenly and obviously circumvent them, and incur no consequences from ASIC or law enforcement;
When the Takeovers Panel can then make additional orders to try and enforce the original circumvented orders, only for the Pirates to simply ignore the orders, and still incur no follow up from ASIC or law enforcement;
The system is clearly broken.


"There were plenty of red flags being waved and many people chose to ignore them."
Sorry, but I have to respectfully disagree with you on this one - at least partially.

Yes the red flags were definitely there: the incestuous transactions with related parties, the mysterious sophisticated investors that JBL loaned 5.8M HML shares to without charging any interest, the unlisted entities that supposedly make tonnes of money but don't have a single employee profile on Linked in to show for it, the fact that the company is based in Queensland...

But there were also some green flags: the LIC is (supposedly) regulated by ASIC, the managing director was a former university professor and the son of an Order of Australia award recipient, the company Chairman himself was an Order of Australia award recipient, the management in general appeared to be upstanding citizens with good reputations, the company appeared to be paying sizable dividends.

The part I disagree with is the "people chose to ignore them" part. Would I be correct in assuming that you work in the finance sector and your line of work involves evaluating companies such as these and making risk assessments? The red flags were plainly obvious to you because you have a well trained eye for spotting red flags. But if I were to show you some lines of computer code would you be able to easily spot the bug that's causing the computer to freeze? If another HML shareholder showed you an x-ray of someone's lung would you be able to spot the abnormality as easily as you spotted the red flags with HML?

The point I'm trying to make here is that HML/BHD/JBL shareholders didn't choose to "ignore the red flags". We simply didn't see them because we didn't know where to look for them. If our eyes were as well trained as yours at seeing these red flags, we'd all work in the finance industry instead of our chosen professions - and then there would be nobody to fix your computer when it breaks or diagnose your illness when you get sick. We also made the mistake of thinking that ASIC had our backs. By investing on the ASIC regulated ASX we thought we were safely "swimming between the flags" - we didn't see that the flags were red.

In my opinion this is one of ASIC's most important roles as a regulator. ASIC needs to look out for novice investors because we're clearly not finance experts and we're too busy pursuing our chosen professions to become finance experts.