AIOFP information letter 2 – to parliamentarians

ASIC’s CONFLICTED ROLE WITH PRODUCT MARKET RELEASE. 

We are pleased that ASIC has finally taken action against the other stakeholders involved with Financial Product manufacturing and distribution in response to the Shield/First Guardian [SFG] fraud. Trustees, Research Houses, Auditors and the product managers are finally being held to account for their conduct.

We are also very pleased that this reality has been acted upon by Minister Mulino with the Adviser favourable CSLR decision to include all stakeholders in the funding mix, a great and fair outcome.

You may have also noticed that the latest SFG market commentary is now focussing on the role Financial Advisers played in the SFG failure with ASIC’s renewed attack on advisory group Interprac.

Interprac had 3 Advisory groups involved with single digit participants out of their 350+ AR’s but ASIC wants Interprac shut down regardless of the mitigating circumstances.

Another signature ‘scape goat’ strategy by ASIC is on the way to deflect blame onto other parties.

We then had Netwealth/Macquarie initially restrict and ban all 350+ innocent Interprac Advisers from using their platform, an absolute disgrace and abuse of power against those who helped build their business.

The PI angle is interesting; Advisers cannot be held responsible for client losses if a fraud is committed so where does this leave Advisers trying to get Clients money returned when ASIC are on the offensive trying to find scapegoats to blame?

The ‘elephant in the room’ question is the appropriateness of ASIC assessing their own conduct when they are solely responsible for ‘registering’ Financial Products and allowing them onto the market. The Managed Investment Scheme [MIS] process has been  fundamentally flawed since its inception in 2001 but there appears to be little political will to do anything about it.

Over the past 25 years we estimate Consumers have had $50 billion of savings lost or impaired from failed financial products that have been through the ASIC MIS process.

This question gets down to basic consumer protection, how can ASIC allow financial products onto the market without assessing the sustainability of the products business model including the Directors background?

Today’s online world allows consumers to invest directly into MIS products with no third-party scrutiny and the ability for the managers to shop around and buy a favourable Research rating from a conflicted Research House to tempt consumer participation.

Furthermore, the current ASIC ‘caveat emptor’ warning to Consumers is pitifully ineffective. We are certain that if Consumers were aware that a product registered/released by ASIC has not been scrutinised for sustainability of business model or quality of Directors they would stay away from it – BUT they innocently think its ‘approved’ by the Government. 

ASIC are fundamentally and profoundly conflicted with the self assessment role, there needs to be an independent Senate Inquiry into the flawed MIS regime, ASIC conduct and the lack of Consumer protection.

As alluded to, this charade has been going on for the past 25 years and all the reasons published in the Senate Inquiry for the 2009 TRIO Fraud are identical to the SFG Fraud 16 years later!

Please remember this SFG fraud was perpetrated by less than .005% of the Adviser profession whilst ASIC/Trustees/Auditors/Research Houses were asleep at the wheel.

Happy to discuss if required.