History repeating itself for regulators
The manner in which Australia’s financial services regulators react to market intelligence has again been brought into question following the failure of Fincorp.
And at the forefront of those asking the questions is Tasmanian Liberal Senator John Watson, who voiced his concerns about a repeat of the Westpoint collapse almost a year ago, including making pointed reference to advertisements relating to Fincorp.
Watson, who has been a key figure on a number of Parliamentary Committees dealing with financial services and superannuation over the past two decades, was last week making clear that he was disappointed there had been a failure to act where Fincorp had been concerned.
Watson, who is one of the longest-serving Senators in Canberra, made his views clear more than a year ago when pointing to the fallout from the Westpoint collapse.
Simply put, Watson used a speech made during the adjournment debate in the Senate to point out there was nothing particularly new about such schemes, just the manner in which they had been allowed to develop.
“Some years ago, this scenario was with the mass marketed tax schemes; today, it is through a property development called Westpoint,” he said in March last year.
He said the “Westpoint fiasco” had shown there were problems not only with the regulator detecting and acting on risky promotions, “but with the law as it currently operates”.
The Senator made clear that while investment schemes such as Westpoint were, indeed, regulated, this did not of itself guarantee protection to unsuspecting investors.
“We regulate fundraising to retail investors under a regulated disclosure regime. Disclosure cannot remove risk, and if you know that an investment is a high-risk proposition, you must be prepared to suffer the loss in the same way that you will pocket the profits if the investment is successful,” he said.
“Westpoint illustrates that there is still work to be done in ensuring that Australia has a regulatory regime that promotes investor confidence and efficiency, while ensuring that retail investors are aware of the risks of such an investment,” he said.
“Both advisers and investors are reliant on the disclosure of information that is adequate or fit for purpose in making an informed investment decision. The provision of this information is primarily the responsibility of the entity and persons offering the investment opportunity.”
Senator Watson concluded his speech by proferring a publication that carried advertisements relating to Fincorp and said: “Can ASIC tell me how many of the advertisements for investment moneys in this insert, this paper, come under their responsibility? Furthermore, which ones, I ask ASIC, are outside their bounds, and just why is that the case?
“This is an area in which we need to take action to protect our fellow Australians and to make sure that they can invest with confidence; that the market is being properly regulated. I thank the Senate and I look forward to legislative action,” he said.
AUTHOR
Mike Taylor
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