UNIT HOLDERS - dont fall for this one!!!!!! look at MFS !!!!!
UNIT HOLDERS
DON’T BE THIS STUPID!
Media and ASIC where are you?
Let me tell you what is going on right now and the disaster that all unit holders face.
Right now there is a whole range of Receivers and External Administrators appointed. Admittedly, having so many is an unnecessary cost but what it does ensure is that there is pressure on to realise all mortgage assets and once that is done, moneys must be distributed to unit holders.
Now, that means that losses are crystallised – that is, we will only get a proportionate share of what they collect. In reality, we can’t expect anything more or less – can we?
We are however entitled to bring action against the directors and any other party associated with the company for our losses in damages and ASIC can take appropriate action.
What MFS did (another failed fund) was that they sold their unit holders across into an NSX listed entity – this meant that unit holders agreed to take a listed security in place of their units.
Unit holders are of course direct creditors in the fund but once you become a shareholder, you are an owner just like the directors and shareholder. In effect, you cannot sue yourself for losses – can you?
Now, on Day 1 this all looks very good. For example, you have been given a $1 share for every $1 invested – there are promises of dividends – you are also told that at any stage there is liquidity (you put your shares on the market and sell them).
But remember the following:
(a) If the assets are impaired and in reality will never reach full value, why would there ever be a profit over and above the share issue price and, in fact, why would not the market mark the shares down to their true value?
(b) What liquidity would there be? Who in their right mind would want to buy a share (unless it was at a massive discount) in an NSX listed vehicle which holds impaired assets? The simple answer is (as the MFS unit holders found out and which is well documented on this website) – no one will.
So who is behind this idea and why? The directors know that if all unit holders voluntarily make the decision to take shares in place of their units, then those unit holders cannot claim losses simply because they made the decision to take shares in place of units.
Other than further potential charges, the biggest charge that ASIC can drive home then evaporate. Amanda Banton (Piper Alderman) doesn’t have any damages to pursue against PI insurers etc – unit holders are effectively on their own, and all the directors are off the hook.
But it actually gets worse.
The new responsible entity – even if they are the best guys in the world – has no obligation to distribute funds realised or, in fact, any pressure to realise funds at all. Unit holders who would otherwise be entitled to demand that assets be sold, converted into cash which is then distributed, sit there as shareholders.
Even if the new RE are the most responsible people in the world, they can draw down the money, re-invest, take the fund on a whole new journey and we unit holders (now shareholders) have no choice in the matter at all.
So what is this proposal that is coming about?
1. Getting directors off the hook.
2. Purporting to provide unit holders with liquidity when in fact none will exist.
3. Taking away unit holders’ rights to quantify damage and bring an action.
This proposal will simply introduce a new layer of ownership; overheads; supposed skill sets etc and more costs for another group who will try and make the best out of a poor group of assets.
You must seek independent financial advice and probably contact Amanda Banton at Piper Alderman.
Be very, very careful.