When are Dr Daniel Mulino Jim Chalmers going to step up to help the 12,000 people that have lost money ($1 billion) in the First Guardian and Shield Master Fund debacle? And by step up, I mean ensure the 12,000 people get their money back.
During a crisis, Government is always quick to splash the cash to major corporations, but when it comes to helping mum and dad investors, you aren’t in such a rush. These people are your constituents. You are there to serve them. Do it.
There are lots of questions about why ASIC isn’t taking responsibility? After all, they should be regulating everyone involved. Is it a case of all care, no responsibility?
- By design, ASIC is not a merit regulator of investments. If investment schemes tick all the right boxes, ASIC must register it. The same with everything within Government, as long as the paperwork looks ok, it is fine. So much for protecting consumers.
- Both APRA and ASIC regulate the same parts of the investment ecosystem, they just do it differently. Neither of them look at the key component, the quality of investment funds. Again, so much for protecting consumers.
- ASIC outsources most of it’s responsibilities.
🏤 The investment fund’s responsible entity must run the scheme in the members best interest and comply with the law. If they don’t, there may be penalties. But the consumer isn’t protected.
🏤 The investment fund’s auditors provide a report on the scheme – that everyone relies on. But the consumer isn’t protected by them.
🏤 The super funds and platforms should ensure the investments are of high enough quality. They rely on the Auditor’s report. If they allow poor investments to be available there may be penalties. But the consumer isn’t protected.
🏤 The Financial Adviser and their AFSL should ensure their advice is in the client’s best interest. There will be penalties and banning. Through a levy all financial adviser pay, consumers have some protection, but it is limited to $150,000 each.
Of the 12,000 people, they won’t all get something back. If the offending AFSL are put into liquidation (like what happened to United Global Capital), AFCA terminates their membership. As a result, the individuals impacted have no recourse.
What I believe Government should do:
- Take responsibility for what has happened. Don’t promise to look into the need for more guardrails.
- Commit to refunding 100% of the funds lost by the 12,000 people, without expecting that financial advisers will do the heavy lifting for you.
- Overhaul the system so ASIC has the powers to be effective gatekeepers, not just
a body that comes in to try and clean up the mess. - Fix the Compensation Scheme of Last Resort. Include MIS and Super funds/platforms. Review the $150,000 limit.
- Clarify who does what, and make them responsible. Don’t make financial advisers pay for everyone elses mistakes.
Angus Taylor MP Pat Conaghan David Pocock Allegra Spender Senator Andrew Bragg, this needs your immediate focus.
Philip Harvey
Independent Financial Adviser | Helping 40-55 year old busy professionals and executives make the most out of their money.