Managed fund co-operation group

[seamisty]

Good Morning!! I am 'encouraged' by the following media article, it appears ASIC is finally getting serious and hopefully former MFS directors will be under just as much scrutiny. Cheers, Seamisty::::http://www.watoday.com.au/breaking-...pursue-eight-centro-bosses-20091022-h9a9.html
ASIC to pursue eight Centro bosses
October 22, 2009 - 2:49AM
Eight senior figures in shopping centre management company Centro could be banned from Australian boardrooms for their alleged roles in understating the company's debts.

Fairfax newspapers report the eight directors and executives faced action from the Australian Securities and Investments Commission (ASIC) for allegedly signing off on the company's accounts, which understated its short-term debt by $2 billion in the second half of 2007.

The company admitted it was in financial trouble because of a global freeze in world credit.

Centro Properties' shares crashed from a 2007 high of $5 to just 5c in 2007.

The accounts were corrected several months after the breach but ASIC believes the eight knew, or should have known, the accounts were inaccurate when they signed them.

Word of ASIC's push in the Centro case has given rise to speculation could take similar action against the directors of other major companies that failed or got into trouble during the financial crisis.

At least three of the eight Centro bosses named by ASIC are expected to fight the allegations, Fairfax said.

 

[mellifuous]

I think this is a brilliant idea. I've been looking for a thread which actually has an amalgamation of all the affected funds.

MAKING Money may be fun if you're an individual investor who doesnt mind profiting from other peoples losses.
But, when you put all your savings and trust into researched "professional" and "respected" financial firms who blatantly do the wrong thing. There is absolutly No avenue both politically or legally to get any justice.

Try looking... Its just not out there.

I guess some people just don't get that it, maybe they REALLY need to lose everything before they can see any sense.

Thanks zixo, that's what we think too. I'd like to think this thread has two goals, (1) sorting out the mess investors in illuqid/frozen listed or unlisted funds find themselves in, and (2) making representations about how to better protect investors in managed funds in general.

I think people feel the frustration, but either they don't know how to go about solving the problem, or for they won't particiapate (or one reason or another).

Good Morning!! I am 'encouraged' by the following media article, it appears ASIC is finally getting serious and hopefully former MFS directors will be under just as much scrutiny. Cheers, Seamisty::::http://www.watoday.com.au/breaking-...pursue-eight-centro-bosses-20091022-h9a9.html
short-term debt by $2 billion in the second half of 2007.

Yes, you're right - this article is what could be described as 'the green shoots of hope' for unit holders in fund damaged by other than the GFC.

We should remain hopeful that the boards of our respective present and past managers will come under ASIC's scrutiny.

Don't hold you breath though.

 

[k.smith]

The sad reality is that investments don’t only go up. From time to time, they go down and people lose. All the complaints you’ve raised (e.g. loss of liquidity, valuation methodology, disclosure requirements, fund mandate and manager remuneration) were well documented right from the start and should have been part of your decision making process before paying in the money.

http://www.theage.com.au/business/what-happens-when-punters-are-taken-for-mugs-20091021-h96e.html

".....Furthermore, like other brokers, the analysts then started asking questions about the make-up of the current and non-current liabilities.

At the time, the annual report stated the current debts were $1.75 billion while the non-current, longer-term debts amounted to $2.84 billion.

In the same report, Mr Scott stated that its ''co-investment business model provides a resilient basis for the group to continue to operate, grow and drive investor returns''.

Unfortunately for investors no one, except the architect of the ''co-invested cemented'' model - Mr Scott - understood what that all meant.

Certainly he had professional property trusts analysts baffled, not to mention the many thousands of small investors who ploughed their hard-earned cash into the vehicle.

And, why wouldn't they have? According to Mr Scott, his model would see the group become the world's biggest shopping centre owner, eclipsing the Lowy family's Westfield group. A Centro share was worth at least $10, he told shareholders at that year's annual meeting........."

While we investors may very well complain about the obvious issues like the trustee, the rating agencies, the bank debt.....seems to me that unravelling the funds is very "baffling" even for the so-called experts....

 

[k.smith]

http://www.abc.net.au/rural/tas/content/2009/07/s2622644.htm

MIS lawyer points the finger at Corporations Act
By Will Ockenden

Friday, 10/07/2009

One of the lawyers involved in the collapse of managed investment company Timbercorp says there are serious problems with how MIS is regulated by the Corporation's Act.

Timbercorp went into liquidation at the end of last month, owning millions of dollars to creditors and investors.

Leon Zwier, a lawyer for the liquidators KordaMentha, says the Act needs to be clearly defined so growers, landowners, creditors and liquidators know where they stand.

"My view is that managed investment scheme provisions of the corporation's act were developed in circumstances where no one turned their mind to the insurmountable difficulties in winding them up," he says.

"I believe Government has an obligation to urgently look at the issue and to urgently move for corporate law reform."

Minister for Corporate Law Chris Bowen was unavailable for comment, but a spokesman says the MIS provisions are currently under review in a joint parliamentary committee and the Minister looks forward to examining the final report......."

".....another important issue to go on our list of items that need government attention.."

 

[mellifuous]

http://www.abc.net.au/rural/tas/content/2009/07/s2622644.htm

MIS lawyer points the finger at Corporations Act
By Will Ockenden

Friday, 10/07/2009

One of the lawyers involved in the collapse of managed investment company Timbercorp says there are serious problems with how MIS is regulated by the Corporation's Act.

Timbercorp went into liquidation at the end of last month, owning millions of dollars to creditors and investors.

Leon Zwier, a lawyer for the liquidators KordaMentha, says the Act needs to be clearly defined so growers, landowners, creditors and liquidators know where they stand.

"My view is that managed investment scheme provisions of the corporation's act were developed in circumstances where no one turned their mind to the insurmountable difficulties in winding them up," he says.

"I believe Government has an obligation to urgently look at the issue and to urgently move for corporate law reform."

Minister for Corporate Law Chris Bowen was unavailable for comment, but a spokesman says the MIS provisions are currently under review in a joint parliamentary committee and the Minister looks forward to examining the final report......."

".....another important issue to go on our list of items that need government attention.."

Well, there you go, it's not just mumbling morons like me who see the simple reality.

"... Minister for Corporate Law Chris Bowen was unavailable for comment, but a spokesman says the MIS provisions are currently under review in a joint parliamentary committee and the Minister looks forward to examining the final report ... "

and every good reason for us to get a letter together within the next week of so and go ahead and get as much support as possible (regardless of the number).

Copies to Mr. Bowen, Mr. Ripoll, Mr. Rudd, and Mr. Swan (I'm not so confident abou't the opposition, they just seem to get confused (and I'm not a labour supporter)).

It really is refreshing to see documents like the one posted here by Mr. Smith

Sometimes it's difficult to maintain dedication to research and learning, and to keep going in the face of lack of support, so, I say 'thanks'.

I think the world is never changed by the many, but rather by the few.

 

[seamisty]

The following is an article from the SMH. It is all very well to say we need simpler versions of PDS etc, but that still does not protect investors from manipulation and misappropriation of funds, lack of compliance and dodgy audits. In my opinion, in the case of MFS/OCV, it collapsed because all of this criteria was not conducted as was meant. So for simple or complex schemes, it is not what is written down that will make a fund succesfull, it is how these rules will be regulated and monitored that will make a difference. Sophisticated or unsophisticated investors currently have no protection when it is proved directors have been negligent, (as in other funds and schemes)and I do not think the solution is to be told 'thats what you get for being greedy and going for high returns'!! If nothing else, at least these problems are under closer scrutiny. (I'd prefer to be 'left at sea')Seamisty

When the small print leaves us all at seaANNETTE SAMPSON
October 24, 2009

There's a saying that if you don't understand something, you shouldn't invest in it. But Australia is a prime market for complex investments, many of them promising something more than the dull old ''plain vanilla'' investment products.

The focus of the regulators has always been on disclosure. So long as investors are informed of the risks, the argument goes, they should be grown-up enough to make their own decisions.

But the growing stream of casualties from the global financial crisis - and what preceded it - has prompted an increasing recognition that disclosure isn't working, especially not when it is buried in 90-page disclosure documents that deter all but the hardiest of researchers.

Debentures, CDOs, so-called income funds, hedge funds and structured offerings are just some of the products that have run into problems, leading investors to proclaim that they were not told of the risks involved.

In some cases, such as many hedge funds, the products were opaque and investors genuinely had no idea where or how their money was being invested. In other cases, risks were understated or buried in layers of promises and complexity.

Cleaning up the mess afterwards is good for the lawyers, but the question that needs to be asked is whether regulators are doing enough to prevent problems from happening in the first place.

The Australian Securities and Investments Commission is surveying complex investments to determine where more investor protection is needed and how to deliver it.

Two schools of thought are emerging.

The first is that we should be focusing on simpler and more effective disclosure. Ditch those 90-page documents put together by teams of lawyers and tell investors in plain English what they need to know.

The Federal Government has a working group developing simplified disclosure, and its proposed changes to margin lending, for example, include a maximum four-page disclosure statement (plus covers and guff) summarising all the key information clients need.

Instead of relying on product providers to decide what information is disclosed and how, the proposed statement has required headings, with information included under each one. So you would be guaranteed of being told what margin calls are and when they can be triggered, the risks of losing money (including information such as whether the lender can reduce the loan to valuation ratio or remove a security from its approved list, thus resulting in a margin call) and the costs involved.

On a wider scale, ASIC has announced an awareness campaign classifying investments that are inside and outside ''the flags'' in terms of the risks they involve. Plain vanilla investments such as bank deposits, blue chip shares and super funds would be regarded as lower risk or ''between the flags'' while more complex investments would be classified as being ''outside the flags'' and to be approached with caution.

It's not a perfect solution - and runs the risk of the regulator getting it wrong or being seen to recommend certain investment products - but it's a big improvement on the old ''caveat emptor'' approach.

A similar idea has been canvassed in the second issues paper of the Cooper review into superannuation, which raises the possibility that super funds with high fees - say, 20 per cent above the median fee level - be required to display a red traffic light on their disclosure documents, while all other funds could display a green light. The review also asks whether super funds should be required to simplify and standardise their fees to allow for easier comparisons.

If nothing else, the traffic lights system would be one way of pressuring high-cost funds to bring their fees down in line with what the bulk of the industry is charging.

But some are arguing that all the disclosure in the world won't protect investors from being sold inappropriate products. Maybe there are some products that shouldn't be offered to retail clients, or not in their current form.

If this sounds a bit extreme, bear in mind that one fast growing segment of the Australian market, contracts for difference, which are a highly leveraged way of betting on market movements - are banned from sale to retail investors in the US. Several jurisdictions have restrictions on products such as margin lending and some managed investments.

Indeed many overseas experts are surprised when they see the sophisticated products being promoted to investors with as little as $1000 in the Australian market. Hedge funds and complex debt products are a prime example.

Much attention has been given to a recent speech by the ASIC chairman, Tony D'Aloisio, in which he raised the possibility of ''product suitability tests'' at the retail level. Disclosure, he said, had been proven to have its limits, and relied on investors having the tools to understand what it meant.

Even at the institutional level, he said, the financial crisis had shown that despite widespread disclosure on products like CDOs, investors didn't appreciate the risks involved.

Banning products is seen by the investment industry as extreme. And perhaps it is. But is wasn't the simple investment products that failed during the financial crisis.

Many of the failures were characterised by traits such as opaque structures, a lack of clarity on where money would be invested, financial engineering, and complex investment arrangements. Like most sophisticated offerings, these products were marketed as being smarter and better than the bog standard offers. And perhaps some are.

But as with any other product, you need to understand exactly what you're buying. If the industry can't smarten up its act and develop products that meet this criteria, tougher measures may well be needed.

 

[k.smith]

The following is an article from the SMH. It is all very well to say we need simpler versions of PDS etc, but that still does not protect investors from manipulation and misappropriation of funds, lack of compliance and dodgy audits. In my opinion, in the case of MFS/OCV, it collapsed because all of this criteria was not conducted as was meant. So for simple or complex schemes, it is not what is written down that will make a fund succesfull, it is how these rules will be regulated and monitored that will make a difference. Sophisticated or unsophisticated investors currently have no protection when it is proved directors have been negligent, (as in other funds and schemes)and I do not think the solution is to be told 'thats what you get for being greedy and going for high returns'!! If nothing else, at least these problems are under closer scrutiny. (I'd prefer to be 'left at sea')Seamisty.."
http://www.brisbanetimes.com.au/bus...print-leaves-us-all-at-sea-20091023-hdb5.html


What is the point of simplifying the PDS, or being directed to the flags if the regulator is not a constant "hands-on" participator? I believe at the time we invested in these billion dollar funds most of us saw the role of the regulator as being constantly vigilant rather than belatedly reactive.
We must pressure the government to enforce the corporations laws, not just reconstruct the broken pieces...

http://www.theaustralian.news.com.au/business/story/0,28124,26251592-30538,00.html

".......What does that say about the relative priorities and effectiveness of the regulators? Albeit after monumental failure over decades on the part of their SEC? At least it swung into effective action after the event.

It is hard to avoid the conclusion that ASIC prefers to "look for lost keys under the streetlight". Heaven forfend that it would actually go to where they were "dropped". On a slightly more generous note, that it is more than happy to shoot at fish, provided they are first placed in a barrel. But then only if they are relatively inoffensive..............."

 

[seamisty]

]k.smith I have a pile of scrap paper which I scribble notes and research on. I am currently scribbling on a reply from Nick Sherry after I sent him a letter of complaint regarding the PIF in Feb this year. He responded in May this year, also on behalf of one I also sent to the treasurer In Feb 2009. Mr Sherry states he is sorry to hear of the problems I was experiencing re the PIF and said he had brought these issues to the attention of ASIC and suggested I do the same. Sorry Mr Sherry, ASIC was well and truly aware of these issues from a year previous and it was due to lack of action that investors had contacted you in desperation and frustration!! He also advised me I had the option of taking private legal action against those parties I considered to have breached the law in relation to their responsibilities as directors of the PIF RE. Well does he think 10,400 individual PIF investors have a spare $500,000 lying idle to do this? Because I know that was the conservative quote from at least 2 lawyers to look into the case on behalf of personel investors, hence the organisation of the class action. Mr Sherry then waffled on about stimulus packages, centrelink benefits and tax bonuses which had no relevance to me and my initial complaint and ended by saying 'protecting investors against losses on such investments does not appear to be a appropiate role for govt as it is likely to significantly distort the allocation of risk and return which is essential to the proper functioning of investment markets', and trusted this information was of assistance!!!! No Mr Sherry, I trust no one and the information was of no assistance to me, that is why your pathetic, fob off reply is in the scrap heap. I have also read similar replies to other investors who contacted Mr Sherry. I hope the parliamentary inquiry is not a useless exercise as many people have spent considerable time and effort in a last ditch effort to be recognised and helped, having received no constructive help to date from one single entity, govt or otherwise. Seamisty

 

[mellifuous]

Many of the failures were characterised by traits such as opaque structures, a lack of clarity on where money would be invested, financial engineering, and complex investment arrangements.

"Amen"

I just wonder how much of our losses related to the 'sophisticated' nature of the managed funds, but rather to the 'traits' in the above excerpt from Seamisty?

Does 'sophistication' really have anything to do with our losses? Do you we have to fully understand an operation to trust a surgeon? or a dentist?

I say that it's got nothing to whether a fund is 'sophisticated' or not, it's all to do with the integrity and professionalism of the manager. It's too easy to poke a stick at 'sophistication', but I'd say that would be poking a stick into thin air - ASIC should be poking a really BIG stick at directors of managing companies to make the directors understand that there are real consequences for wrongdoings.

Like most sophisticated offerings, these products were marketed as being smarter and better than the bog standard offers. And perhaps some are.

http://www.merriam-webster.com/dictionary/sophisticated

'sophisticated' = "...
Main Entry: so·phis·ti·cat·ed
Pronunciation: \-tə-ˌkā-təd\
Function: adjective
Etymology: Medieval Latin sophisticatus
Date: 1601

1 : deprived of native or original simplicity: as a : highly complicated or developed : complex <sophisticated electronic devices> b : having a refined knowledge of the ways of the world cultivated especially through wide experience <a sophisticated lady>
2 : devoid of grossness: as a : finely experienced and aware <a sophisticated columnist> b : intellectually appealing <a sophisticated novel>

”” so·phis·ti·cat·ed·ly adverb
synonyms sophisticated, worldly-wise, blasé mean experienced in the ways of the world. sophisticated often implies refinement, urbanity, cleverness, and cultivation <guests at her salon were usually rich and sophisticated>. worldly-wise suggests a close and practical knowledge of the affairs and manners of society and an inclination toward materialism <a worldly-wise woman with a philosophy of personal independence>. blasé implies a lack of responsiveness to common joys as a result of a real or affected surfeit of experience and cultivation <blasé travelers who claimed to have been everywhere>. ..."

 

[seamisty]

Thanks for the English lesson mellifuous! Something else to read and ask yourself will you ever again bother to waste time reading recommendations from rating firms and agencies when the information provided comes straight from the 'horses mouth' and in several cases has proved to be not worth the paper it was written on? Seamisty

http://www.theaustralian.news.com.au/business/story/0,28124,26246682-36418,00.html Tim Blue | October 23, 2009
Article from: The Australian
RESEARCH houses and ratings agencies must rely on the supervisory activities of regulators such as the Australian Securities and Investments Commission to determine whether there has been any fraudulent activity in a corporate entity, the head of one of the world's biggest investment research firms, Morningstar, says.

Joe Mansueto, chairman, chief executive and majority shareholder of the firm that he founded 25 years ago, said: "We are not regulators here. If someone is giving us fraudulent information it is sometimes extremely hard for anyone to detect that.

"It is the regulators' role to root out fraud."

Morningstar has been criticised for awarding a four-star rating to Astarra Strategic, a reportedly high-performing hedge fund operated by Astarra Managed Funds, now subject to an investigation by ASIC.

ASIC has ordered Astarra Managed Funds -- an Albury-based group with more than $1billion under management -- to remove its product disclosure statements from its website.

ASIC has been barred by a judge from commenting on the case.

Mr Mansueto said that Morningstar provided data and analysis for about 11,000 funds in Australia. Of these some 4500 were covered by analyst research and about 7500 by quantitative analysis methods to check how they ranked in the agency's star rating system.

"We don't know if the fund under investigation is fraudulent or not. We are making an evaluation based on the information we are getting.

"We have allegations here. We can only base our ratings on information that we are given," he said.

"If someone is criminal in intent and they are cooking the books and providing fraudulent information, they can fool regulators and they can fool ratings agencies. We do our best but we are only able to work with the information that we are provided."

Worldwide, Morningstar has risen to rate about 140,000 funds since Mr Mansueto began it 25 years ago on a kitchen table in Chicago, working with half a dozen computers.

He took the company public in 2005, and with its shares up more than 100 per cent.

The son of a doctor, Mr Mansueto is a serial entrepreneur. His first business venture came in the late 1970s, selling soft drinks from his room at the University of Chicago.

When a career counsellor suggested business, Mr Mansueto said: "I don't want to go into business -- it's kinda boring.

"But I ended up going to business school and right after I graduated I came across Warren Buffett's writing, and then I got very excited about investing. It was an epiphany for me."

With $US80,000 in start-up capital, in April 1984 Mr Mansueto jammed five tables and three IBM personal computers into his kitchen, and began to create databases on fund information. Within six months the first copy of the resulting publication, the 400-page Mutual Fund Sourcebook, was on his desk, containing everything an investor needed to know about every fund on the market.

Today Morningstar has revenues of more than $US500m ($541m), to be "far and away my best investment", says Mr Mansueto, who is worth around $US1.3bn. But he still invests personally, with a portfolio of fewer than 20 stocks.

He is also a publisher, owning two US business magazines.

In Australia, Morningstar publishes fund and stock research to investors, financial planners, brokers and fund managers and earlier this year bought Intech, a relatively small implemented consulting firm to add to its retail investor newsletter business, the former Aspect Huntley

 

[mellifuous]

Thanks for the English lesson mellifuous!

No problems - but it wasn't meant to be an English lesson - what I really mean is that once started, learning is endless - we just never know how little we really do know, until we start to learn.

Learning about the word 'sophisticated' is in itself a arduous task, learning everything about investments would be impossible.

When ASIC really does focus on the bad guys, then the investment world will become a safer place to play in.

 

[seamisty]

Hi All, I invite you to add to this list of suggestions to be fowarded to Mr Rippoll for consideration ASAP. Thanks, Seamisty

1. We propose recommending to Parliament that legislation be enacted to create an independent entity charged with the assessment of frozen managed funds ..(perhaps to work in conjuction with ASIC..)


2. That the entity could assess whether any tax payable/paid by the fund in recent years related to REAL profit, or to 'profit' calculated on some false or fraudulent basis.

3.That managed funds should be prohibited from being listed in the event they are frozen.

4.That the concept of 'offer' be erased from the Corporatons Act, and be replaced with compulsory redemptions paid by the manager of frozen funds as soon as some predetermined level of surplus cash appears in the fund, say every 2% - each member should be paid a fixed percentage on a pro rata basis - that is, for example, each member be paid 2% of their holdings.

5.If a manager really thinks that the 'fund will be strong again'', then that manager should call a meeting, give members A COMPREHENSIVE REPORT on the state of the fund, put forward A DETAILED STATEGY, and seek members' support - otherwise, leave the unit price at the constitutionally determined price at the time the fund was frozen and progress to wind up the fund as opposed to depleting fund assets to cover operating costs and management fees.

 

[k.smith]

Hi Seamisty,

It would be in our interests to elaborate on point 1.
1. We propose recommending to Parliament that legislation be enacted to create an independent entity charged with the assessment of frozen managed funds ..(perhaps to work in conjuction with ASIC..)
AND...which will inform unitholders by way of letters and statements a full disclosure of their current position and options.

 

[seamisty]

Hi Seamisty,

It would be in our interests to elaborate on point 1.
1. We propose recommending to Parliament that legislation be enacted to create an independent entity charged with the assessment of frozen managed funds ..(perhaps to work in conjuction with ASIC..)
AND...which will inform unitholders by way of letters and statements a full disclosure of their current position and options.

Agree totally k.smith. I have had a quick look at dupeds' suggestions on the OCV thread and he has made some valid points also. (thanks duped) I will post them on here as well so mellifuous can incorporate them into the finished letter. Seamisty

6. If an unlisted fund is frozen (or listed fund is suspended from trade) then all transactions AND transfers under e.g. lines of credit with related parties be banned. Or something less restrictive such each and every transaction above a very low threshold requiring an auditor sign off, or quarantined in a separate entity which is in voluntary administration. Total ban on drawing down of unsecured facilities when a fund is frozen.

7. Severe restrictions on unlisted funds undertaking related party transactions. E.g. Every related party investment by an unlisted trust requires registration of a floating charge whereby the fund's investment is automatically regarded as secured as at the date of the initial investment if:
the related party or any party related to the related party, within 6 months:enters administration or has liqidators appointed, share price drops by a certain amount, initiates divestment of major assets etc.

8. Compulsory insurance against the action of directors, officers, compliance committee officers, etc up to the value of e.g. 25% of the funds reported value. Key details of insurance policy included in the PDS, changes to the policy to be announced to the investors AND market within 1 week, and the entire policy document available free of charge within 1 week from request in paper or electronic format. Electronic format must be text searchable.

9. Any attempts by trusts or RE's preventing or extorting investors/unit holders seeking unit holder lists, trust documents, insurance policies be severly punished. Namely, codify amounts that can be charged and penalties of 10 times the difference. (Legisalating that this must be covered by insurance policies.) Such requests to be fulfilled within 1 week. Penalty $1000 a day. In paper or electronic format. Electronic format must be text searchable.

10. Total ban on related party transactions by unlisted trusts when any director or officer or their family or associates of the related party owns shared in the related party or party related to the related party and has a loan secured by those shares.

11. Fix up the notification of variations in chapter 2K. E.g. any drawn down of a facilities of 10% of the value of facility brought about by something like a 'transaction document' is to be regarded as a change in the terms of the charge. Massive punitive measures where company anouncements conflict with the credit facility as well as some sort of automatic ASIC litigation measures in the legislation for breaches.

12. Take punitive $$ legal action against Deloitte for failing in their duties and putting themselves in a position whereby PTQ now has an arguable case that Deloitte has a conflict of interest.

13. Any draw down of a credit facility by a fund (e.g the facility PIF had with RBS) of more than 10% of current value (audited value within the previous 3 months) be reported to the shareholders/credit holders within a week. And/or, mandatory reporting to shareholders/unit holders of new credit facilities or where existing facilities have been extended, or/and drawn down by 50% AND 75% AND 90%. Penalty - automatic administration.

 

[mellifuous]

Agree totally k.smith. I have had a quick look at dupeds' suggestions on the OCV thread and he has made some valid points also. (thanks duped) I will post them on here as well so mellifuous can incorporate them into the finished letter. Seamisty.

Yes, I note the issues raised by 'dupe'.

However, I think we have to approach this matter on at least two levels:-

1. The situation in which we find ourselves at this time, and how to protect investors' interests in the best possible way; and,
2. The issues relating to how we got here - eg. related party loans, managers' self interest, mezzanine loans, etc.

Time permitting, I'd like to try to present a letter to the forum in relation to issue 1. above, within the next two days.

We could discuss the letter for amendment and transmission to the various addressees. I know we all have our individual biases, so criticism is welcomed.

After the first letter is settled, then we could discuss a second letter relating to issues we feel led to our current position, and then if necessary, another letter relating to other matters that arise outside of the ambit of the first two.

Any comments about this approach?

 

[seamisty]

Yes, I note the issues raised by 'dupe'.

However, I think we have to approach this matter on at least two levels:-

1. The situation in which we find ourselves at this time, and how to protect investors' interests in the best possible way; and,
2. The issues relating to how we got here - eg. related party loans, managers' self interest, mezzanine loans, etc.

Time permitting, I'd like to try to present a letter to the forum in relation to issue 1. above, within the next two days.

We could discuss the letter for amendment and transmission to the various addressees. I know we all have our individual biases, so criticism is welcomed.

After the first letter is settled, then we could discuss a second letter relating to issues we feel led to our current position, and then if necessary, another letter relating to other matters that arise outside of the ambit of the first two.

Any comments about this approach?

Mellifuous, I appreciate the time you are prepared to put into this and will personally support any letters you propose that will further highlight our situation and could possibly help in preventing a repeat scenario. As time goes on, some investors are starting to acknowledge that our predicament is far worse than we were led to believe initially and there is in fact, little chance of ever recouping our initial investment, not to mention 'a stable income stream from a secure, stable investment'. Strategies from these self proclaimed 'gurus' are in short supply, fund managers touting their expertise appear to be suffering from a severe case of laringytis or is it simply a case of 'when the going gets tough, HIDE'????? Whatever, in the case of the PIF, it is quite obvious that WC made promises it cannot deliver but prefer to let investors dog paddle until they eventually drown because WC are not prepared to admit that they got wrong! In my opinion, the promises to us were made on purely the assumption that PIF would be handed millions of dollars from OCV in compensation sooner rather than later, which would give WC the opportunity to pay us 3 cents per unit, open pandoras box for management fees with a few mill$$ left over to kick start life support for the PIF. It never happened and we are being financially crippled even further with astronomical legal fees which have produced absolutely zilch to date!!!! It will be interesting to see how small the list of PIF assets are currently and how large the impairment list is, not to mention 'operating costs'. Since I do not waste my time calling the WC hotline anymore, I sincerely hope investors are not still being read a spiel that may not eventuate. Peed off, you bet I am!!!Seamisty

 

[mellifuous]

"... It is fair to say that ASIC undertakes less surveillance on listed property trusts that on other managed investment schemes. There are two main reasons for this. First, the product is reasonably simple and can be described relatively easily by issuers. And, secondly, as you are aware, the product is regulated primarily by the ASX once the securities have been listed. ..."

http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/property_trust_speech_180504.pdf/$file/property_trust_speech_180504.pdf

"... ASIC indicated some concerns about the contents of Product Disclosure Statements being issued by property trust issuers.1 Areas identified were:
Use of theoretical returns and unsupported forward-looking statements
...
Failure to explain, as a significant feature of the product, the possible dilution of investors' interests by future transactions. ..."

Is 'the fund will be strong' an 'unsupported forward-looking statement? (FMF Issue).

"... ASIC has taken corrective disclosure action where disclosure of fees and charges in
the PDS is deficient—where, for instance, there is little or no disclosure of:
the percentage or dollar amount of fees
the way they are calculated, or
how and when a fee or charge is paid.
Nor will we accept a situation where there is inadequate disclosure of a product issuer's capacity to vary fees and charges, including references to maximum permissible fees. ..."

This is interesting because when Trilogy took over the FMF, the PDS was withdrawn, so in effect, Trilogy didn't have to explain much at all. For example on fees, Trilogy hasn't yet answered the simple question as to whether they are taking 'direct fees' (FMF issue).

There is a lot to read in this ASIC document.

Here are some graphics I did to express my view about non-liquid / listed non-liquid managed funds:-

 

[mellifuous]

Well, to cap it off, the issues to be dealt with in the first letters should be:-

Non-Liquid (frozen) managed funds

1. THE VALUE OF A UNIT

(a) [pertaining to liquid funds and non-liquid funds] In the event the unit price is determined by way of a fund's constitution, then amendment of same shall only be way of a special resolution (75%)

(b) In any event, a manager shall not unilaterally amend the constitution of a managed fund while that fund is non-liquid or within 180 days of a fund being deemed non-liquid.

2. THE MANAGER SHALL DISCLOSE A STRATEGY FOR THE FUND'S RECOVERY

(a) Within 14 days of deeming the fund as non-liquid, the manager has disclose a strategy for the fund's recovery.

(b) In the event the fund is deemed liquid within the period in 2. (a) then the requirement of disclosure by the manager is waived.

3. MANAGER TO DISCLOSE DETAILS OF LOANS

(a) Within 60 days of deeming the fund non-liquid, the manager shall disclose the details of each security property attached to a loan in default or capitalized, how much is outstanding, and for how long.

(b) In the event the fund is deemed liquid within the period in 3. (a) then the requirement of disclosure by the manager is waived.

4. MANAGER TO DISCLOSE THE DETAILS OF DEBT

(a) Within 30 days of deeming the fund non-liquid, the manager shall disclose the level of debt owed by the fund, and the status of that debt.

(b) In the event the fund is deemed liquid within the period in 4. (a) then the requirement of disclosure by the manager is waived.

5. MANAGER TO PROPERLY ADVISE MEMBERS

(a) The manager should, within 30 days advise members of the present state of the market and the future prospects for the fund.

(b) such advice should include the likelihood of success and the evidence the manager used to make the assessments.

6. STATUTORY ADMINISTRATOR

(a) The Statutory Administrator would scrutinize the fund and the manager's strategy to make enforceable orders as to the fund's future including (but not limited to), (a) orders to wind up a fund.

(b) The Statutory Administrator shall make a recommendation of legal action against any entity (person or company), providing the Administrator finds prima facie evidence to support such a recommendation.

(c) However, such orders could be set aside by a meeting of members passing a special resolution (75%).

7. TAXATION

(a) If a court or the proposed statutory entity decides that a manager has wrongfully disclosed a profit by inflation of the value of assets or by any other means, then that court or proposed statutory administrator should be enabled to direct the tax office to refund any tax paid by the fund or members of that fund as a consequence of the manager's wrongfully disclosed profit.

8. OFFERS TO BE REPEALED

(a) that all provisions in the corporations act relating to offers by managers of managed funds be repealed and replaced by the following:-

(i) A manager of a non-liquid managed fund shall make redemption payments to members of that fund at such time as the fund accumulates a surplus amount equal to 5% of F.U.M. (Funds Under Management), providing:-

(A) All facility providers have been repaid; and,

(B) Such payments to members be made fixed percentage of unit holdings, and on a pro-rata basis.

9. NON-LIQUID LISTED MANAGED FUNDS

(a) If a listed managed fund remains non-liquid (frozen) for more than 60 days, then the manager must call a meeting to allow members the opportunity to pass an extraordinary resolution (50%) to de-list the fund.

10. COMMUNICATIONS TO MEMBERS

(a) [pertaining to non-liquid and liquid managed funds] The manager must include in the notice of any meeting, any document put to the manager, providing such document is supported by 200 members and complies with existing provisions of the corporations act pertaining to explanatory memorandum accompanying a notice.

(b) A member has not be permitted to support more than one such document as described in 10. (a) above.





Of course there will be a lot of amendments to be done to the foregoing, but at least it's a start.

I'm looking forward to comments and suggestions for amendments.

Remember, this first letter relates only to issues to help us get out of WHERE WE ARE NOW.

It will be necessarily be long and detailed, so we have to keep to the key points (IMO)

Thanks.

 

[k.smith]

"We have an oversight and monitoring function. We often arrive after an accident occurs."

http://www.weeklytimesnow.com.au/article/2009/10/28/127771_latest-news.html

and what about when journalists tried to stop an "accident" from happening?

http://www.theaustralian.news.com.au/story/0,25197,22318180-16942,00.html

oversight..?? monitoring...???

 

[seamisty]

"We have an oversight and monitoring function. We often arrive after an accident occurs."

http://www.weeklytimesnow.com.au/article/2009/10/28/127771_latest-news.html

and what about when journalists tried to stop an "accident" from happening?

http://www.theaustralian.news.com.au/story/0,25197,22318180-16942,00.html

oversight..?? monitoring...???

We have an oversight and monitoring function. We often arrive after an accident occurs."


They must be on bloody crutches k.smith!!!! Its taking a long time for them to arrive!!

'But there was an onus on the industry to self regulate and report breaches of the law, he said.'


I've been writing letters of complaint to all and sundry for 19 months reporting breaches for stuff all!!!

She said 'investors could take civil action if they believed they had been deceived by an MIS product disclosure statement.'


Same words of support and wisdom from nick Sherry!!!!

All the more reason to plod along making noise and registering dissatisfaction
with the current regulatory system!! Thanks mellifious for the time and effort you are committing to draw attention to managed fund investor concerns. Seamisty