Key whistleblower hits out at witch-hunts
One of the financial services insiders who first raised the alarm about Trio/Astarra, Dominic McCormick, has strongly criticized the media's coverage of alleged problems with IOOF, claiming they have missed the mark and will do little to improve the financial services industry.
McCormick, the chief investment officer with Select Asset Management, has written a column published by the Portfolio Construction Forum in which he has claimed "more facts and objective assessment of the allegations raised [with respect to IOOF] are necessary".
"However, to me, this increasingly looks like a witch-hunt sparked by a bitter ex-employee(s) (the "whistle-blower") with curious access to confidential internal IOOF company documents, combined with the chase for a story by over-eager journalists who most likely don't fully understand those documents," he wrote
McCormick said there was no doubt the reports had succeeded in generating a media frenzy and strong readership from an audience keen to devour more "evidence" that the financial services industry is corrupt.
"Even politicians have become involved with a speech in Parliament by Senator John Williams, as well as IOOF managing director, Chris Kelaher, and head of research, Peter Hilton, being requested to appear before a Senate enquiry next week."
However, McCormick said the first alarm bell for him was "the exaggeration in the headline on the first Fairfax article on 20 June 2015, entitled ‘IOOF's boiler room throws customers to the wolves'".
"A boiler room is a fraudulent operation where fake or illiquid companies owned and promoted by the scammers are pushed to new investors with the insiders then dumping those shares to other new investors at the pumped-up prices. There is zero evidence that any such "boiler room" activity has occurred at IOOF," he wrote.
"I am all for getting crooks out of this industry. I was the ‘whistle-blower' who first alerted fund manager and blogger, John Hempton, of Bronte Capital to the Astarra/Trio fraud which cost investors around $200 million. I was also helping relatives of my partner get compensation from CBA for the poor advice of Don Nguyen long before Adele Ferguson was writing about it (albeit unaware of its scale at the time)."
"In my view, "whistle-blower" actions in the financial services industry should primarily be about protecting current or prospective investors from losses caused by fraud or inappropriate advice, poorly structured products or leverage, or in helping them obtain compensation for such losses.
McCormick ends his column with the paragraph: "The media, politicians and a range of industry participants who have joined and helped propel this witch-hunt need to stop and think. Is this right? Is this fair? And, is this the best way to build a better industry and win back confidence of investors? In the fog ahead we can faintly make out the sign - WRONG WAY, GO BACK! "
Recommended for you
The Federal Court has imposed a $10 million penalty on Macquarie Bank for failing to prevent and control unauthorised fee transactions by third parties including financial advisers.
A financial advice firm has seen a weekly decline of 10 advisers, with all moving to a new licensee, while Centrepoint Alliance continues its “growth story”.
Sequoia Financial Group has seen a top-level reshuffle as the chair of the board, John Larsen, steps down after five years in the position.
As statements of advice move into the rear-view mirror, Vital Business Partners explores how financial advisers are adopting innovative documentation strategies.
