Australia’s retirees facing more finance company collapses
In 18 months, 20,000 investors have lost almost $1 billion in three high-yield debenture collapses: Westpoint, Fincorp and Australian Capital Reserve (ACR).
The Australian Security and Exchange Commission’s (ASIC) new head, Tony D’Aloisio says more investments might be at risk.
“There’s another $34 billion at stake, nearly a quarter of which is in the highest risk ‘unlisted and unrated’ category,” according to Tony D’Aloisio, in one of his statements to the Senate Estimates Committee in May.
He said that ASIC would, under his leadership, take more interest and action about Westpoint-style schemes.
One of the essential problems ASIC has had to deal with in Fincorp and ACR is that stopping their fund-raising almost guarantees their failure. Clamping down hard on the issuers of the other $8 billion or so in very high-risk debentures might well see some fail that otherwise would muddle through. But not taking action means ASIC ends up being blamed anyway.
D’Aloisio gave the Senate Estimates Committee a plan to tackle the highest-risk sector.
However, the ASIC has to face the fact that the investors who are attracted to such operators do so because they see, hear and read enticing and secure-sounding advertisements for the products promising very nice returns and/or they’re tipped into them by “financial advisers” who may receive big commissions for doing so.
These investors don’t read the detail of ASIC’s Fido website. The watchdog’s worthy warnings aren’t heard but the siren calls of product advertisements which make an investment look safe when it’s completely without security.
