Banksia Financial Group bites the dust

[Judd]

I'm not here to discuss the specifics of my SMSFs portfolio.

You weren't asked to. You're the one who raised the matter of your SMSFs losses.

The fact is that tens of thousands of people have lost their savings in MISs.
I know for a fact (because I have a copy of the fund register of unitholders) that there is a large exposure by SMSFs in this fund, which suggests to me that this would also be the case in other such funds.
Now that I understand the risk that one can lose not just some, but ALL of their capital investment in such schemes,( not clearly disclosed in the PDS at the time of investing imo) it defies logic that such investments can be appropriate for SMSFs.

And I enquire again, many lost money who invested in MIS outside of the SMSF structure so is it implied that all MIS are banned, regulated by APRA or doesn't that matter? Carry the logic presented in regard to regulation of MIS to a conclusion and do not focus on a particular structure for investing as that is all an SMSF is despite the tax concessions.

 

[k.smith]

You weren't asked to. You're the one who raised the matter of your SMSFs losses.



And I enquire again, many lost money who invested in MIS outside of the SMSF structure so is it implied that all MIS are banned, regulated by APRA or doesn't that matter? Carry the logic presented in regard to regulation of MIS to a conclusion and do not focus on a particular structure for investing as that is all an SMSF is despite the tax concessions.

The issue of private losses suffered outside of SMSFs is a separate one.
The government doesn't concern itself with strategy or purpose when people make personal investment decisions.
The point is that SMSFs are structures which enjoy tax concessions and tax benefits supported by every taxpayer in Australia.
This makes them different to private investment structures
Hence the government has an interest in SMSFs ..

[url ]http://www.theaustralian.com.au/business/wealth/trio-aftershock-runs-through-smsfs-the-case-has-reignited-concerns-over-the-safety-of-self-managed-super-funds/story-e6frgac6-1226043477096[/url]

''....The government is certainly prescriptive on how a SMSF is run. Under the "sole purpose" test set out in the SIS Act, the trustees must ensure that the fund is maintained for the sole purpose of providing retirement benefits to members. The trustees must "formulate and implement" an investment strategy for the fund, "having regard to liabilities, risk and return, diversification and liquidity".
....''

In it's REGULATION IMPACT STATEMENT for Unlisted property schemes: Update to RG 46 dated March 2012 ASIC wrote

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/RIS-update-RG%2046-published-28-3-2012.pdf/$file/RIS-update-RG%2046-published-28-3-2012.pdf

(please cut and paste the link)

''....Our conclusions are as follows:

(a) The structure of unlisted property schemes and the associated risks mean that they are different to other financial products offered to investors.

(b) The disclosure of the risks of these products has in many cases been insufficient to ensure that retail investors are provided with adequate information about the unlisted property scheme and whether the products will meet their investment needs, objectives and risk profile.

(c) Because the PDS is the primary document provided to retail investors, the information it contains must be of high quality to address the information needs of retail investors. However, we have concerns about the general quality and comparability of information for retail investors in PDSs for unlisted property schemes. If PDSs fail to disclose key information in a clear, concise and effective manner such that investors can easily identify it, investors are less likely to understand these products.

(d) The problem can be characterised as one of market failure through asymmetric availability of information. Investors do not have access to sufficiently clear information about unlisted property schemes because the current product disclosure information available to them does not describe the risks of the product clearly enough. As a result, investors may not receive the information they require to make an informed decision about whether to invest.
...''

( it goes on ....)

 

[Judd]

So in your view it is OK for the 70 yo, who has struggled to put aside $10,000 or so to pay for his/her funeral or pass on to their children, to lose that because it is not in superannuation? However, as much as I disagree with it, it is your view and you are obviously entitled to hold that opinion.

 

[k.smith]

So in your view it is OK for the 70 yo, who has struggled to put aside $10,000 or so to pay for his/her funeral or pass on to their children, to lose that because it is not in superannuation? However, as much as I disagree with it, it is your view and you are obviously entitled to hold that opinion.

No, I did not say that.
I said that is a different issue.
I am saying that superannuation savings should not be exposed in these schemes.

 

[Judd]

We have a different perspective on this issue. To me it matters not whether funds are invested directly or via superannuation. The effect of losing those funds is the same on the people involved and just as damaging As far as I am concerned that is the prime issue not a tax structure. To consider only that aspect is, to my way of thinking, too narrow and blinkered. And if it is legal to invest in a product outside of superannuation then it should also be legal to invest through superannuation be it, unlisted funds, art work, CFD's options or forex.

 

[k.smith]

We have a different perspective on this issue. To me it matters not whether funds are invested directly or via superannuation. The effect of losing those funds is the same on the people involved and just as damaging As far as I am concerned that is the prime issue not a tax structure. To consider only that aspect is, to my way of thinking, too narrow and blinkered. And if it is legal to invest in a product outside of superannuation then it should also be legal to invest through superannuation be it, unlisted funds, art work, CFD's options or forex.

My perspective on this issue is that it matters a great deal.
Unlike privately invested $$$, funds invested through super enjoy tax concessions which we all as taxpayers we pay for.
Why should a taxpayer support tax concessions on funds invested in schemes where ALL the investment can be lost?

perhaps these links may illustrate how different super investment is compared to private investment...
http://www.theaustralian.com.au/nat...super-tax-breaks/story-fn59nsif-1226526153194
''....Treasury's in-house modelling of superannuation benefits has highlighted the uneven distribution, with the highest-earning 10 per cent of the population receiving 36.1 per cent of the $15.5 billion in tax concessions on superannuation contributions...''

http://www.smh.com.au/business/treasury-secretary-cracks-the-super-whip-20121202-2aoxr.html
''..Apart from the motor industry, there are not many sectors greedier in their rent-seeking than the super sector. Dr Parkinson took the opportunity to remind the funds in person he is no soft touch. How is this for frankness: ''The government ensures the superannuation sector is provided with a steady, guaranteed and concessionally taxed supply of money. No other industry has this guarantee. None.''

 

[Judd]

Most interesting.

Trio Capital
ION
HIH
GIO
Centro
Quintex
Bond Corporation
Sonray Capital,

to name but few, were subject to regulatory and auditory requirements. What were the outcomes?

Evangelise away, bro. You are merely wasting bandwidth.

 

[k.smith]

Most interesting.

Trio Capital
ION
HIH
GIO
Centro
Quintex
Bond Corporation
Sonray Capital,

to name but few, were subject to regulatory and auditory requirements. What were the outcomes?

Evangelise away, bro. You are merely wasting bandwidth.

from another Evangelist...


http://www.moneymanagement.com.au/o...nger/the-structure-of-unlisted-property-funds

that was written in 2010

( before Banksia collapsed)

 

[ASICK]

50 - 65%? Ho Hum

http://www.smh.com.au/business/banksia-investors-get-first-payment-20121207-2b0n4.html

 

[k.smith]

http://www.bendigoadvertiser.com.au/story/1177702/burnt-banksia-investors-deserve-truth/?cs=82
''....The company collapsed with debts of $663 million after being given a clean bill of financial health from a Bendigo auditor only weeks earlier.

Most of those who lost out were pensioners and retirees. ...''

http://consumeraction.org.au/consum...unsupervised-finance-and-debenture-companies/
''...‘We’re concerned that, as things stand, debenture companies are allowed to look and feel like banks when they’re nowhere near as tightly regulated’ said Gerard Brody, Director of Policy & Campaigns at Consumer Action.

Consumer Action believes that written disclosure about the high risk nature of debenture investments in product information statements is undermined by the way some of these companies operate and present themselves. For example, the ability to rent Bank-State-Branch Numbers, commonly known as BSB numbers, can lead people to feel like they’re depositing their money into a traditional bank account.

We understand that the selling of BSB numbers is relatively common practice. But we believe this practice has been allowed to develop without regard for its potential impact on consumers. it is timely to examine what rules and responsibility should be placed on entities selling and buying BSBs.

‘Current regulation on debentures relies on “disclosure and investor education”. But any disclosure or education about risk is countered by their use of BSB numbers, in-branch ATMs and account offerings that look like regular savings accounts. We need to ask why a company like Banksia was allowed to look and feel like a bank – it’s confusing to say the least and has the potential to mislead inexperienced investors.

‘It’s often said that if it walks like a duck and quacks like a duck, it’s probably a duck. But, in the case of debenture companies, it can look like a bank and sound like a bank, but is certainly isn’t a bank,’ said Mr Brody....''

 

[k.smith]

http://afr.com/p/national/asic_investor_exam_plan_won_work_Z7iudWpcSNl8g6IGkfXg6O

''....Investors, brokers and market experts have rejected a proposal by the corporate regulator to force investors in risky or complex products to pass an online exam.

Australian Securities and Investments Commission chairman Greg Medcraft told The Australian Financial Review he had grave concerns about the growth in the number of self-managed super funds delving into complex and risky products, following collapses including Banksia Securities, Trio Capital, Storm Financial and MF Global.

Figures from the Australian Taxation Office on Friday reveal that do-it-yourself super funds have almost doubled since 2004, from 271,000 to 478,000 and hold more than $435 billion in assets.

“I wake up in the middle of the night thinking that the growth of self-managed super funds is just all going to end in tears and we will see a repeat of Storm Financial,” said chairman of consumer group Choice Jenni Mack, who sits on ASIC’s advisory panel.....''

''....No matter how many layers of protection investors have, the ultimate protection is themselves. If they don’t understand or think that they are being hoodwinked, then they should just say no.”
....''

??what if they did understand on the available information given to them at the time and are still hoodwinked?

 

[ASICK]

No Time for Talk - Action !

http://www.abc.net.au/news/2012-12-14/receivers-consider-suing-banksia-directors/4428922

http://www.perthnow.com.au/news/ban...ng-back-millions/story-e6frg12c-1226544727940

 

[Garpal Gumnut]

http://www.bendigoadvertiser.com.au/story/1177702/burnt-banksia-investors-deserve-truth/?cs=82
''....The company collapsed with debts of $663 million after being given a clean bill of financial health from a Bendigo auditor only weeks earlier.

Most of those who lost out were pensioners and retirees. ...''

http://consumeraction.org.au/consum...unsupervised-finance-and-debenture-companies/
''...‘We’re concerned that, as things stand, debenture companies are allowed to look and feel like banks when they’re nowhere near as tightly regulated’ said Gerard Brody, Director of Policy & Campaigns at Consumer Action.

Consumer Action believes that written disclosure about the high risk nature of debenture investments in product information statements is undermined by the way some of these companies operate and present themselves. For example, the ability to rent Bank-State-Branch Numbers, commonly known as BSB numbers, can lead people to feel like they’re depositing their money into a traditional bank account.

We understand that the selling of BSB numbers is relatively common practice. But we believe this practice has been allowed to develop without regard for its potential impact on consumers. it is timely to examine what rules and responsibility should be placed on entities selling and buying BSBs.

‘Current regulation on debentures relies on “disclosure and investor education”. But any disclosure or education about risk is countered by their use of BSB numbers, in-branch ATMs and account offerings that look like regular savings accounts. We need to ask why a company like Banksia was allowed to look and feel like a bank – it’s confusing to say the least and has the potential to mislead inexperienced investors.

‘It’s often said that if it walks like a duck and quacks like a duck, it’s probably a duck. But, in the case of debenture companies, it can look like a bank and sound like a bank, but is certainly isn’t a bank,’ said Mr Brody....''

I predicted something like this would happen, about now, two years ago , on the Storm Financial thread. I get no pleasure from being correct.

Education, education, education is essential for all investors.

And not from Financial Advisers.

" Never ask a barber if you need a haircut "

gg

 

[Julia]

I predicted something like this would happen, about now, two years ago , on the Storm Financial thread. I get no pleasure from being correct.

Education, education, education is essential for all investors.

Those of us who made this recommendation on the Storm thread were soundly abused for our suggestion.

 

[Garpal Gumnut]

Those of us who made this recommendation on the Storm thread were soundly abused for our suggestion.

Another mob of muppets with a similar range of "expertise" have just opened a new financial centre on one of our major thoroughfares in Townsville, usual bling and awning out the front, and a webpage costing at least $120.

Next time I'm over that way I'll take some prunes before I go and visit the ablutions.

Some thankless bastard stole a gold tap from the men's in the Ross Island Hotel.

I'd be sure to find a replacement.

There will be more, and more, and more Banksias.

ASIC are to blame in the end.

gg

 

[So_Cynical]

Its looking more and more like the financial services industry is ganging up with consumer groups, regulation groups and various rule enforcement agency's to kill off the spectacular growth in SMSF's, even though the average SMSF is achieving a return far superior to industry and commercial funds...go figure.

 

[ASICK]

Keepin' the Thread Alive

http://www.heraldsun.com.au/news/vi...rges-for-banksia/story-e6frf7kx-1226537184720

http://www.heraldsun.com.au/busines...ng-back-millions/story-fndgp8b1-1226544727940

http://www.standard.net.au/story/12...ry-fund-directors-liability-not-issue/?cs=383

"THE amount of insurance carried by directors of the failed Banksia Securities and Cherry Fund companies should not determine if they were sued for allegedly not carrying out their duties properly, the solicitor handling a class action legal case against them said."

I guess that's something a lawyer making money might say - but, there's little point paying a lawyer to sue if there's nothing in it for the client: Size (of the likely return from litigation) really does matter.

 

[Garpal Gumnut]

Re: Keepin' the Thread Alive

http://www.heraldsun.com.au/news/vi...rges-for-banksia/story-e6frf7kx-1226537184720

http://www.heraldsun.com.au/busines...ng-back-millions/story-fndgp8b1-1226544727940

http://www.standard.net.au/story/12...ry-fund-directors-liability-not-issue/?cs=383

"THE amount of insurance carried by directors of the failed Banksia Securities and Cherry Fund companies should not determine if they were sued for allegedly not carrying out their duties properly, the solicitor handling a class action legal case against them said."

I guess that's something a lawyer making money might say - but, there's little point paying a lawyer to sue if there's nothing in it for the client: Size (of the likely return from litigation) really does matter.

Agree , Directors are personally liable under Corporation Law, and this mob will probably be sued to the hilt, up to and way beyond their insurance levels.

Generally though directors often have passed their wealth on to various partners, children, hookers, parents, or grandparents.

So the Banksia victim's money may at this very moment be tucked in to some lingerie, with or without mothballs.

gg

 

[ASICK]

There's no Harm in Dreaming

http://www.mmg.com.au/local-news/kyabram/investors-offered-voice-1.38982

‘‘If we can tell the receiver that at a meeting in Kyabram on January 14 so many hundreds of people unanimously supported what was proposed you would be disappointed if the receiver didn’t take some notice.’’

Well, there's no harm to dream. However, as an avid reader of crystal balls, I'd be surprised if investors could sway any decision by a receiver. "Tea or coffee anyone? Don't eat too many 'Ginger Nuts' - oh! and don't forget to sign the non-disclosure agreement".

More on Banksia:

http://www.bendigoadvertiser.com.au...-accountants-investigated-over-banksia/?cs=80

 

[k.smith]

www.standard.net.au/story/1232440/banksia-legal-action-details-revealed/?cs=72

''...BANKSIA investors will be contacted within the next 30 days to give them more information about a class action legal case on their behalf against the Banksia directors and auditors.
The solicitor organising the class action, Mark Elliott, said a letter to be sent to investors in Banksia Securities (BSL) and the associated Cherry Fund (CFL) would explain the class action, provide a summary of the proceedings and give details of the legal people organising the class action....''

''...The class action, which was lodged with the Supreme Court of Victoria, alleges The Trust Company failed to adequately supervise the financial position and viability of BSL and CFL to protect the interest of the holders of debentures and/or unsecured deposit notes issued by BSL and CFL....''

Other parties named as defendants in the class action are the directors of BSL and CFL who are alleged not to have adequately managed the two companies, and the auditors who are alleged to have failed to adequately audit BSL and CSL’s books or report any breaches of law to the Australian Securities and Investments Commission (ASIC)...''