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ASIC Medcraft: outside 'the flags' ~ "investors on their own, no protection"

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ASIC warning to self-funded retirees:

*Beware, any consumers showing symptoms of "self belief" in ASIC -- that it's function is truly representative of a Government Legislated Consumer "Watchdog" -- is grievously mistaken, as such, is extremely hazardous to your financial well-being and you risk losing everything.

ASIC's Greg Medcraft was asked in Senate Estimates last night what he was doing about "the sharks in that safety net". And he confirmed that"self managed investors were out on their own" and that they needed to sign a declaration acknowledging that there is "no protection".

MATHIAS CORMANN [to ASIC]: What is your timetable?  So you're waiting for the Government to make a response and then ASIC decides how it fits into that? So ASIC doesn't have its own timetable yet?

TONY EASTLEY: The corporate regulator has suggested that self funded retirees be required to acknowledge that they're not covered by guarantees for theft or fraud.

It comes after investors in Trio Capital discovered they weren't eligible for compensation when the company collapsed in 2009.

I'm joined in the studio by our business editor Peter Ryan. 

Pete, good morning.

Many of those Trio investors who've been burned genuinely thought they were covered by a safety net. So what's ASIC up to?

PETER RYAN: Well, Tony the parliamentary report into the Trio collapse highlighted an "expectation gap" that many Trio investors wrongly believed that their self managed funds were covered and guaranteed by the prudential regulator APRA.

However investors quickly discovered they were, quote, "swimming outside the flags" and that managing their own super carried a much higher risk and no compensation.

ASIC's chairman Greg Medcraft was asked in Senate Estimates last night what he was doing about the sharks in that safety net. And he confirmed that self managed investors were out on their own and that they needed to sign a declaration acknowledging that there is no protection.

GREG MEDCRAFT: Really what should probably happen is that there should be a written acknowledgement at the time somebody is setting up a self managed super fund that basically they're not covered for theft or fraud and that in fact not only should they sign a written acknowledgement when they set it up, but that every two or three years they should actually, you know, sign a new acknowledgement as they do with the nominated beneficiary for a fund, acknowledge that in fact they have no coverage for theft or fraud.

TONY EASTLEY: ASIC chairman Greg Medcraft there.

Peter, should one of the key financial regulators though - ASIC or even APRA - have picked up on what Trio was doing with fraud and alerted investors?

PETER RYAN: Well, Tony the parliamentary report highlighted concerns that the two regulators ASIC and APRA failed to share information about Trio.

And APRA, which regulates the trillion dollar super industry, said last night it thought the Trio matter was incompetence rather than fraud and didn't communicate with ASIC.

ASIC is yet to respond to the findings of the parliamentary inquiry. Under questioning from the Opposition financial services spokesman Mathias Cormann, ASIC commissioner John Price confirmed the regulator is waiting on directions from the Federal Government before investigating.*

JOHN PRICE: We need to make sure that what we're doing is going to fit in with what the overall Government response…

MATHIAS CORMANN: What is your timetable? That's essentially just what I'm trying to get a handle on. 

JOHN PRICE: It would depend on what the government, when the Government responds to the Trio inquiry. We don't…

MATHIAS CORMANN: So ASIC doesn't have its own timetable yet?

JOHN PRICE: No. We're waiting for the overall response so we can make sure there's a sensible package…

MATHIAS CORMANN: So you're waiting for the Government to make a response and then ASIC decides how it fits into that?

JOHN PRICE: We want to make sure that there is an overall sensible package of regulation.

TONY EASTLEY: ASIC commissioner John Price. And earlier we heard from business editor Peter Ryan in the studio.

*EDITOR'S NOTE (31/05/2012): This transcript has been amended for clarity.


*Apart from Banksia, the other notable debenture issuer to collapse recently was NSW-based non-bank lender Provident Capital, with unsecured creditors voting to liquidate the $130 million sub-prime lender last week.

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  • doyla66
    doyla66 Thursday, 01 November 2012

    So, basically, ASIC is admitting that there is NO REGULATION AT ALL! Everybody should immediately withdraw ALL their cash from these "schemes".

  • doyla66
    doyla66 Saturday, 03 November 2012

    the parliamentary report highlighted concerns that the two regulators ASIC and APRA failed to share information about Trio.
    If that was information that they should have shared then they are partially responsible for the losses that these people experienced if that information could have allowed them to make more informed decisions at some stage within the investment prior to collapse.
    Who makes the call on what is released in the consumers' interests and what doesn't?
    Do the consumers' have to ask the right questions to get the necessary answers from the regulators and the investment company?
    Who read and approved the FSG and PDF for the company?
    This sounds like deliberate failure to disclose or deceptive and misleading conduct or even fraud ...

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