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BFCSA: BBY Client Trust Fund shortfall rises to $16 million! Go Figure! Dumb Regulators were asleep at the wheel

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Huh??  Did this not happen at Westpoint?


BBY client trust fund shortfall rises to $16 million, administrator KPMG says

By finance reporter Elysse Morgan

Updated yesterday at 8:28am


The administrator of collapsed broking firm BBY has dramatically lifted its estimate of the amount of money missing from client accounts.

KPMG now says there now may be a shortfall of $16 million from client trust accounts, instead of the $10 million it previously estimated.  Administrators Stephen Vaughan and Ian Hall warn in an updated report that the figures could get worse.

"These numbers may change if further information comes to light as a result of ongoing investigations," they cautioned.

A damning report into collapsed broking firm BBY, released late on Friday last week, revealed the firm may have been insolvent a year ago, which would be a serious breach of the Corporations Act.

BBY was owned and run by Glenn Rosewall and his father the tennis champion Ken Rosewall was on the board, as was solicitor David Perkins.  The matters have been referred to the corporate regulator, ASIC, by the administrators.

"It is the role of ASIC to determine what if any further action may be warranted in relation to any possible breaches of the Corporations Act," the report said.

The preliminary report by administrator KPMG, which was appointed in May, reveals that BBY "may have been insolvent since June 2014."

If dishonesty is found to be a factor in insolvent trading, like allowing the company to rack up more debt, a director can face fines of up to $220,000 and/or imprisonment of up to five years.

The report also found BBY provided "misleading information" to its lender to secure more funds and that it was possibly misusing client trust funds as far back as June last year.

Unsecured creditors are unlikely to get much of their money back, with KPMG estimating a return between "zero and 24 cents in the dollar".  There is also evidence that the company's financial records "were not up to standard".

The KPMG report, authored by Mr Vaughan and Mr Hall, is scathing in its summary of what led to the company's collapse.

"Poor governance and an inadequate risk management framework, inadequate capital, trading losses and an inability of management to foreshadow and appropriately respond to a number of adverse events and margin calls," they wrote.

The company collapsed last month when it declared it was insolvent, leaving hundreds of clients millions of dollars out of pocket and with their funds frozen.

It also forced the closure of hundreds of clients' options trades, which has left those clients with as yet unknown losses.  Legal action is being considered by clients and creditors.  A second creditors meeting is to be held on June 22.


BBY's Glenn Rosewall remains on ASIC panel

Jun 15 2015

Clancy Yeates

Former executive chairman of failed stockbroker BBY Glenn Rosewall remains a member of an official panel charged with taking action over breaches of the market integrity rules, despite claims BBY might have misused client funds, misled its lenders, and breached the Corporations Act.

An explosive report from administrator KPMG on Friday said there might be a shortfall of up to $10 million in BBY client money, while also alleging "misleading" information had been provided to BBY's lender.  While the claims are concerning for BBY's directors, a spokesman for the Australian Securities and Investments Commission confirmed on Sunday Mr Rosewall was still a member of ASIC's markets disciplinary panel.

The panel, made up of part-time members, is responsible for making decisions on issuing infringement notices and whether to accept enforceable undertakings over alleged breaches.  The panel, made up of part-time members, is responsible for making decisions on issuing infringement notices and whether to accept enforceable undertakings over alleged breaches.

ASIC also confirmed it would consider further investigation and action regarding BBY if the administrators formally notified ASIC of breaches of the Corporations Act.  "ASIC has been in contact with the administrators throughout their administration and understood that they were developing some of the concerns that have been highlighted," the spokesman said.

The disciplinary panel that Mr Rosewall is part of includes more than 20 part-time members, who are appointed by ASIC, with chairman Lisa Gay convening three-member panels to look at individual matters................

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Guest Wednesday, 12 August 2020