Liquidators have been appointed to wind up Westpoint Corporation following an application by the Australian Securities and Investments Commission (ASIC) to have the company shutdown on grounds of insolvency.
The orders, made in the Federal Court of Perth, came as ASIC chairman Jeff Lucy flagged the possibility of the watchdog taking action against financial advisers who recommended the company’s failed products and defended the regulator’s approach to Westpoint.
Lucy yesterday told ABC television’s Inside Business program that the role of advisers was being investigated as “the overwhelming majority” of investors had sought financial advice before committing funds to Westpoint products. He said large numbers of people had lost significant amounts of money and in some cases had borrowed against their homes to invest.
“We are very interested in the advice that has been given to people who have gone into Westpoint. We have already identified that that is an area we are working on. To the extent that people have given advice inappropriately, we will prosecute,” he said.
On the high commissions Westpoint reportedly offered to advisers for recommending its products, Lucy told the program: “I certainly agree that 10 per cent is an extraordinarily high figure. There would be little doubt that it would influence the behaviour of the advisers, and I would like to think that the investors, when they were confronted with that figure of 10 per cent, would have reacted to it.”
Lucy said there was a clear obligation for advisers to notify investors of the commissions they were paid and if investors had not been made aware of the high commissions, ASIC would prosecute.
He also defended ASIC’s actions regarding Westpoint, saying the regulator had been “extraordinarily vocal for some years” in warning investors about mezzanine products like those Westpoint was selling.
“Secondly, we made specific warnings to Westpoint, and indeed at one point I was actually receiving communication from their lawyers saying that we were harassing them,” he said.
