Still some activity

June 23, 2015

I am still here, but, obviously, other priorities have taken hold.

A piece on “unregulated advisors”: FT: Advisors Under Fire.

Beware investments in Australia: The Telegraph: Lessons to learn from this list of dud investments

State of the Australian financial advice industry

April 22, 2015

Yep, lots of victims left out in the cold:

According to the Financial Ombudsman Service (FOS), more than $15 million worth of compensation applications should be paid to victims but the organisations have either gone belly up or their professional indemnity insurance doesn’t cover the payouts. It means hundreds, possibly thousands of customers are left out in the cold.

Hello? What about those who don’t even qualify to use the FOS?? You know, like overseas investors who invested in a what-turned-out-to-be-an-essentially-unregulated fund?


Yeah, pretty livid.

January 5, 2015

Thanks Australian Financial System, you toothless pony:

“We understand the dis­appointment of investors who lost money on their investments. However, in this particular case, specific issues are assessed appropriately through the official regulatory and court processes as appropriate, while any systemic policy issues have been considered through our Financial System Inquiry,” Senator Cormann said.

So, what would have to happen for criminal charges to be brought up?

An anonymous Australian investor is quoted as saying:

“While I personally hold no hope of any kind of recompense from the Australian government, I had hoped that criminal proceedings would be taken against Drake and his cohorts,” she said.

“Considering that Drake has apparently walked away with $26m in the form of a ‘loan’ to himself from (another fund) the Managed Performance Fund, the possibility of only having to pay a fine of $200,000 is peanuts to him.

“What kind of a message is ASIC sending? It is one of encouragement to carry on, as the only punishment they will ever receive is a slap on the hand!”

The ultimate side-step:

“ASIC can confirm that we are not pursuing a criminal investigation at this time but as usual, would obviously reassess if other evidence became available,” a spokesman for ASIC said.

Peter Drake has a blog

August 8, 2014

And it’s here, and I’m pretty much speechless.

Drake: “Not a Ponzi”

July 27, 2014

Among the many things I would like to add after reading this expose from The Post, is a response to Drake. As far as I know, he hadn’t directly addressed the Ponzi charge, at least not that I remember. The context is this:

“When you did the arithmetic … the cash [coming in] was being used just to pay two things – fees and income distribution – and that is the classic Ponzi scheme,” says Rodger Bacon, chairman of Australian fund group Trilogy. …

It seems as if Drake was interviewed for this piece, who seems to respond directly to Bacon:

Drake denies that Bacon’s theory is true.

“That’s ridiculous,” says Drake. “A Ponzi, as I understand it, is where there is no asset.”

Well now. So, all you need for fraud is some piece of asset, and everything is honky dory? What if that asset was there as a smokescreen, which is undoubtedly was, for as the article documents, it was completely overvalued, and there was essentially only one of them (of any real consequence) anyway!

So, there you have it, future fraudsters. Erect a Ponzi scheme, whereby you depend on new investments to pay your fees and for redemptions. All you got to do is make it seem low-risk and target retirees, and don’t forget … have some asset somewhere, yeah? Nevermind how much it’s worth, it’s just a smokescreen!

Peter Drake, you, sir, are evil.

Finally, a proper expose

July 27, 2014

Up until now, we’ve never had this story told in public, from the investor’s point of view. Now we have it. This article from South China Morning Post is an absolute must-read. Some choice quotes follow:

Covers the Ponzi aspect:

“When you did the arithmetic … the cash [coming in] was being used just to pay two things – fees and income distribution – and that is the classic Ponzi scheme,” says Rodger Bacon, chairman of Australian fund group Trilogy.

Covers the commissions aspect:

“The growth was fuelled by the greed of advisers,” says Terpilowski, describing the Managed Performance Fund as a scam. “I don’t believe that clients were aware when investing new money of the new commission levels or the redemption problems, or why would they invest?”

Covers the Independent Financial Advisors:

A spokeswoman for Thailand’s Securities and Exchange Commission (SEC) says it can find no record of a licence being granted to his firm, under either of its names, or to Wood himself. The spokeswoman says it is an offence to give investment advice without a licence in Thailand. Wood was asked by Post Magazine to provide proof that he and his firm are licensed. He did not do so.

The LM Investor Victims:

MOST INVESTORS IN THE Managed Performance Fund were never told about the redemption problems, says Graham Smith, founder of the LM Investor Victim Centre, which helps represent LM investors in Hong Kong and overseas. In many cases, the advisers disappeared the moment LM failed, he says.

Smith is trying to spearhead a global response by encouraging his 525 members to write to Australia’s prime minister and their local politicians.

The lack of diversification? Covered:

While common practice is for fund managers to diversify their holdings, the accounts show that a hefty 60 per cent of the Managed Performance Fund was tied up in one asset, a HK$1.4 billion mortgage on Maddison Estate.

Wow. Just wow.


Are finance companies in Thailand fleeing?

June 27, 2014

Andrew Drummond reports, mentions PFM, SCI Group, Alan Hall and others. Also included is the origin of the phrase “Independent Financial Advisor” which I had no idea about:

The term ‘Independent Financial Adviser’ is a term used to describe people who are registered with the Financial Conduct Authority in Britain (formerly the Financial Services Authority)  which PFM was certainly not, but these guys of course pretend they are fully registered and accountable for their actions.

He also speculates on whether the Thai Securities Exchange Commission could ever “draw blood”:

[W]ould this organisation [Thai SEC] ever draw blood.  There are complicated issues. ‘IFAs’ will claim of course that they only deal with foreigners and all their transactions are ‘offshore’.

Neat trick, that.

Update: This post has been updated by the author to remove a reference to a group that isn’t leaving Thailand.

Upshot from ACA email

May 7, 2014

Okay, folks, this is my take.

Obviously, I must first proceed by saying that I have no financial training whatsoever, that I’m a programmer and a teacher by profession. So, I have no idea what I’m talking about. But this is my take anyway.

The ACA Lawyers wrote to registered investors yesterday to indicate to us that they would not be pursuing a class action in this case, because some other lawyers were already on it. The lawyers that are on it, are the infamous Piper Alderman of Trilogy fame. However, Piper are only perusing class action for the First Mortgage fund, not the MPF fund.

So, no one is taking class action against MPF. Oh, but they’ll happily direct you to Financial Ombudsman Service (FOS) and take it further on your behalf.

For First Mortgage investors, I guess this is good news, except:

  • Trilogy doesn’t have a great track record
  • They probably have really high expenses
  • It’s Trilogy representing you

For MPF investors, this is why this sucks:

  • The FOS are not a “day in court” in any sense of the matter.
  • You don’t need a lawyer to proceed with FOS (assuming FOS takes your case, they can refuse to)
  • I think you have to do it individually, one case at a time, so it’s not even a “class action”
  • It’s not clear if using FOS is even possible and a reader of the site concurs.

In other words, the ACA email is another reminder as to how screwed up the MPF fiasco is. With each passing day,  legal “protections” around it seem to be falling flat on its face. From its inception, if anyone bought into this fund, and something happened to it, there was never any legal recourse for it at all.

Obviously no one who buys a fund would think that it’s absolutely 100% safe. But this wasn’t even 50% safe. It was most likely to fail for investors, from the way it was set up, including its legal status. This isn’t a case of a fund going south and investors being upset by it going south, this is fund that would almost certainly go belly up and investors being told that it was, on the risk scale, on the low-risk side.

That’s just outright fraud, people.

This is why, I continue to assist, that MPF investors drum the beat as loud as we can about what happened here. We were sold a fund with a very dubious legal position. This is the message we should be sending. How can ASIC have even allowed this fund to be sold in the first place?

The only legal recourse for MPF investors is that which is being pursed by Korda Mentha. Obviously, it is frustrating because they don’t update us often enough, but that really is the best bet right now. And remember, they just got full access to the books, which is vital for court proceedings, so it’s going to be a while before we hear anything else. The last update they gave was a good sign.

Again that’s my take. Feel free to disagree, or elaborate, with me in the comments.

Eleventh MPF update has dropped

April 9, 2014

The main takeaway this reader had after reading the eleventh update is that LM are truly a bunch of criminals who has it coming to them, oh and the best thing that ever happened after the collapse is that KM were put in charge. They are kicking LM left, right, and center.

First of all, the update documents the fact that LM tried to claim that any leftover fund money is theirs. If you are wondering about the leftover money, that is the money that that was sitting in the fund when it went into administration. It’s basically equal to the amount of money that is owed elsewhere, before investors, which is why we lose everything, but it’s a pile of money, more than $400 million.

And it’s the pile of money that administrators can use to run their ship and engage in recovery actions. So LM, by claiming it as their own, were trying to suffocate KM so that they couldn’t do any recovery actions. And, here, by recovery actions, what I actually mean is “sue the pants off of LM for breach of trust.”

Even more brazen is that the records were withheld from KM, which they would need in order to prove in court that it was all a scam. And from the sound of it, KM had a pretty eventful day in court, where LM time and again are trying to find a way to weasel their way out of the damage they wrought.

So, while there isn’t any more optimism that we will see any money anytime soon, at least for today, after this update, things look like MPF investors have the upper hand.

Figures revealed

March 27, 2014

The International Advisor claims to have seen a grand total of the investment monies that went into the MPF.

There have been suggestions advisers who sold the fund were paid commissions in excess of 4%. Assuming a commission rate of 5%, those who sold A$1m in the fund would have earned commissions totalling A$50,000.

I wonder how they got a hold of that document…