Sonray collapse

[Judd]

This is all Sonray clients need - not. A very nasty situation.

"Administrators find missing links between $20b and Sonray client

ABOUT $20 million in shares belonging to clients of the failed broker Sonray Capital Markets is in the hands of Saxo Bank, but administrators are unable to match the shares to individual clients.

Saxo Bank, which provided Sonray's trading platform, holds an additional $9 million in cash belonging to Sonray clients. Ownership of ''particular assets'' might be ''almost impossible'' to trace because client money was pooled, Sonray's administrators, Ferrier Hodgson, told the Federal Court in Melbourne."

http://www.smh.com.au/business/admi...en-20b-and-sonray-clients-20100719-10hwo.html

 

[Ruby]

This is extremely scary! How on earth did Sonray manage to operate the way they did for as long as they did? Weren't they ever audited?

However, I find it hard to believe that the administrators cannot match shares to clients. The Saxo platform has an accounting feature, and each client has an account number. If clients were able to access this and view their current holdings, why can't the adminisrators?

 

[Judd]

Good on ya, diddums. Well after the horse has bolted - as usual. But then I don't see why the Government, or anyone else, should necessarily protect investors from themselves. They are, after all, walking, talking, sentient beings who know what they are getting into before signing on the dotted line. If not, well, just another bit of flotsam in one of life's financial wrecks.

http://www.smh.com.au/business/regulator-cracks-down-on-cfds-20100722-10m1v.html

"Regulator cracks down on CFDs

July 22, 2010 - 12:52PM

Brokers of derivatives such as contracts-for-difference should tell customers more about the risk they might collapse, the corporate regulator says.

Today's crackdown by the Australian Securities and Investments Commission comes a month after the collapse of CFD provider Sonray, which left about 4500 clients owed more than $45 million.

In a report released today, ASIC said it had reviewed 64 product disclosure statements and found many of them "deficient".

 

[Ruby]

Judd, I think you are a bit unkind to be so cynical in the face of the distress this matter has caused the clients of Sonray.

While I agree with you that we are all responsible for doing due diligence before we enter into a contract, no amount of fine print reading would have protected clients in this case. In their PDS Sonray state that "the purpose of the segregated account is to separate Client monies from Sonray monies" yet they illegally raided those client funds to try and trade themselves out of a large hole. Regarding the share ownership, I can find nothing in the PDS which even mentions that client shares are held in a Sonray omnibus account (which is not to say it isn't there!) Why would anyone assume that when they bought shares they did not have legal title to them?

In my view there was a lot of sly dealing going on here. There does not appear to have been full disclosure to clients either by Sonray or its agents - "introducers" I believe they are called - who would be Authorised Representatives of Sonray. Companies holding an AFSL, and their Auth Reps, are required to have a duty of care towards their clients, and this seems to have been lacking in this case.

I think ASIC has a lot to answer for in their obviously very lax regulatory procedures

 

[Julia]

I think ASIC has a lot to answer for in their obviously very lax regulatory procedures

Ruby, I understand what you're saying, but Judd does have a good point.
If we expect ASIC to always protect people from themselves, where will it end?
This is the theme that constantly comes up in the Storm Financial thread.

On investing via Sonray, did the client receive a contract note, clearly indicating the ownership of the shares?
If not,what did the clients receive to authenticate their holding?

 

[cutz]

On investing via Sonray, did the client receive a contract note, clearly indicating the ownership of the shares?
If not,what did the clients receive to authenticate their holding?

I think Judd is just gloating over the fact that some derivatives traders got burnt, perhaps he/she feels that derivatives are to blame for the devaluation of his/her chess sponsored holdings.

Also I don't understand why many feel that just because the clients didn't receive contact notes/chess holding statements that they are to blame for losses sustained when this broker collapsed.

 

[Julia]

Also I don't understand why many feel that just because the clients didn't receive contact notes/chess holding statements that they are to blame for losses sustained when this broker collapsed.

Please don't misrepresent what I said in my post, cutz. I asked about contract notes because I had a vague memory of hearing they were not issued and I was interested to know what was substituted, if anything.

I'd never heard of Sonray until the collapse and have only read bits of this thread. I am making no judgement about anyone who invested via Sonray.
And I'm certainly not 'blaming clients' for dishonest dealing by Sonray.
Mischievous of you to suggest that.

 

[cutz]

Apologies if I sounded mischievous,

I don’t know much about Sonray but on their website everything seems to checkout, a quick look at the PDS shows nothing out of the ordinary.

If they are using a US company as one of their frontends, lack of contract notes/chess statements is the norm, account statements should show open positions/cash holdings.

No one seems to know why this broker has collapsed, news articles only bang on about the volatility of CFD’s and nothing else, reporters don't seem to have much knowledge on financial products.

Normally with futures/options/margined shares, if maintenance margins can’t be met, positions should automatically be closed out thus protecting the broker and other clients, heaven knows what happened in this case but I don't think the clients should be liable for losses.

 

[usom8]

All Sonray Global Investors Should Take Actions Now

Sonray Action Group has been formed for Sonray Global investors to take actions to get their money back (http://groups.google.com/group/sonrayinvestors).

I talked to quite a few Sonray clients. Some of them have money in both Sonray Trader and Sonray Global. Among them, some have more money in Sonray Trader than they do in Sonray Global, and believe they should not be part of Sonray Action Group, as they might get less money back overall if they get money back first from Sonray Global. This kind of the thinking could well be wrong. The scenario can only be true if there is money left in Sonray Trader after Saxo Bank’s claim and other expenses.

Saxo Bank has claimed to be a secured creditor for a substantial amount of money. If its claim is successful, the money left in Sonray Trader may not be enough to meet the claim, and Saxo Bank may want to have its hand on the money of Sonray Global. In this circumstance, all Sonray Global investors would be better off to claim their assets in Sonray Global first.

The whole process of getting our money back will be lengthy and costly. It is imperative for us to get as much money out and as early as possible.

I believe Sonray Global investors have strong legal ground to claim the money back in full.

It is for the best interest of all Sonray Global investors to take actions now, no matter how small is the portion of your Sonray Global account in your overall investment.

Join Sonray Action Group: http://groups.google.com/group/sonrayinvestors

The strategies of our actions:

We now kwon that our account value shown on Sonray Trader are incorrect. Sonray Trader uses the platform of Saxo Bank. Serious questions should be asked about the role Saxo Bank played in the collapse of Sonray.

But it is not wise for us to pursue the case against Saxo Bank before the realization of the value of the trading platform.

We should now:
Try to get as much money out as possible and as early as possible;
Get the public and media attentions;
Seek government and ASIC actions to recover the assets of Sonray;
Write to candidates of major parties to get political support; and
Ask for the possible extension of government guarantee of deposits in financial institutions to Sonray clients.

After the sale of the trading platform:
We should take class actions against Saxo Bank for the full amount of our Sonray Trader accounts and damages caused. And
Seek government and ASIC actions against Saxo Bank.

We should also take actions at anytime against any claim by Saxo Bank to the assets of Sonray or Sonray client account.

 

[Ruby]

If we expect ASIC to always protect people from themselves, where will it end?

No, I don't expect ASIC to protect people from themselves, but I do expect ASIC to protect people from a company which does not make full disclosure to its clients, and then steals its clients' funds to make investments on its own behalf. ASIC is the corporate watchdog; that is its job!

On investing via Sonray, did the client receive a contract note, clearly indicating the ownership of the shares?
If not,what did the clients receive to authenticate their holding?

I am not too sure of the details on this. I believe (as told to me by a former client) clients could download from the trading platform a contract note of sorts which had their account number on it but no name. I am not much help here as have never been a client. Perhaps one of the clients who has posted here can explain.

Sonray did not collapse because clients mishandled their CFD accounts. It collapsed because Sonray misapppropriated client funds - stole them - and then lost them throught poor trading.

 

[Julia]

Sonray did not collapse because clients mishandled their CFD accounts. It collapsed because Sonray misapppropriated client funds - stole them - and then lost them throught poor trading.

That's exactly what I've read in the media, Ruby. I was just interested in knowing a bit more of the background and have not suggested that any clients mishandled anything.

One aspect I'm interested in is why clients chose Sonray over another broker? Did they offer services unavailable via one of the 'ordinary' brokers like Comsec, Etrade etc?

Re ASIC: I'd be the last person to defend them. They seem to be one of the most useless organisations ever. But I suppose until a company actually does something wrong (as in this case Sonray personnel stealing client funds) ASIC can't be sitting on the shoulder of every company in Australia to attempt to prevent them doing something illicit.

 

[skyQuake]

That's exactly what I've read in the media, Ruby. I was just interested in knowing a bit more of the background and have not suggested that any clients mishandled anything.

One aspect I'm interested in is why clients chose Sonray over another broker? Did they offer services unavailable via one of the 'ordinary' brokers like Comsec, Etrade etc?

Re ASIC: I'd be the last person to defend them. They seem to be one of the most useless organisations ever. But I suppose until a company actually does something wrong (as in this case Sonray personnel stealing client funds) ASIC can't be sitting on the shoulder of every company in Australia to attempt to prevent them doing something illicit.

People looking for leverage... Could have gone with IG Markets, CMC or any of the other registered thieves out there.

Only diff is with cfds you don't get a contract note cause you hold only beneficial title (?) or they don't even do it DMA.

I am however, interested in whether you can claim everything back if you have a full portfolio of stocks (assuming its DMA and everything is done proper with HIN etc.)

 

[skc]

People looking for leverage... Could have gone with IG Markets, CMC or any of the other registered thieves out there.

Only diff is with cfds you don't get a contract note cause you hold only beneficial title (?) or they don't even do it DMA.

I am however, interested in whether you can claim everything back if you have a full portfolio of stocks (assuming its DMA and everything is done proper with HIN etc.)

That's a bit harsh to call them registered thieves. I would be at a loss if there is no CFD to trade. Personally I don't mind some newbie punting money away to keep these guys profitable. That way my money is safer.

Even with DMA CFDs your counterparty is still the CFD provider. The shares are held by the provider, and you have a contract with the provide for the difference in open and close price (hence the name CFD!).

 

[Ruby]

One aspect I'm interested in is why clients chose Sonray over another broker? Did they offer services unavailable via one of the 'ordinary' brokers like Comsec, Etrade etc?.

I suppose it was just another company to choose from. Maybe their marketing was good. I know I was aggressively pursued at one time to open an account with them.

Re ASIC: I'd be the last person to defend them. They seem to be one of the most useless organisations ever. But I suppose until a company actually does something wrong (as in this case Sonray personnel stealing client funds) ASIC can't be sitting on the shoulder of every company in Australia to attempt to prevent them doing something illicit.

I agree, Julia. ASIC can't do much until someone lodges a complaint or something untoward reveals itself. I do wonder why this took so long to come to light, and why annual audits failed to reveal discrepancies much earlier. Perhaps our laws need tightening up. I don't have the answers.

 

[robots]

That's a bit harsh to call them registered thieves. I would be at a loss if there is no CFD to trade. Personally I don't mind some newbie punting money away to keep these guys profitable. That way my money is safer.

Even with DMA CFDs your counterparty is still the CFD provider. The shares are held by the provider, and you have a contract with the provide for the difference in open and close price (hence the name CFD!).

hello,

a DMA provider doesnt buy/or sell the share, its all smoke and mirrors, advertising spiel

so if you short BHP with a DMA provider what do they do?

thankyou
associate professor robots

 

[cutz]

hello,

a DMA provider doesnt buy/or sell the share, its all smoke and mirrors, advertising spiel

so if you short BHP with a DMA provider what do they do?

thankyou
associate professor robots

Guys,

I'm a little confused and I don't trade them so perhaps it's none of my business but aren't DMA CFD's those things traded on the ASX cleared by SFECC ?

Or are they something else on than bucketshop type and exchange traded type (ie. a third type of CFD) ?

 

[artist55]

One aspect I'm interested in is why clients chose Sonray over another broker? Did they offer services unavailable via one of the 'ordinary' brokers like Comsec, Etrade etc?

I can tell you exactly why we went with Sonray. We subscribed to the Australian Wealth Gameplan written by Kris Sayce. He did a lot of due diligence when recommending shares, and told us of the risks vs rewards, and he highly recommended Sonray, but what he didn't tell us was that there was some sort of payback for him when we used Sonray, nor did he tell us that it didn't matter what shares he recommended if we were going to lose it all through Sonray anyway.

Needless to say, the silence from Kris Sayce and Port Phillip Press has been deafening.

We were sent a small booklet recommending Sonray when we subscribed, but we are having trouble locating booklet as we moved house last year. Does anyone out there have a copy?

 

[DocK]

For a short period of time I subscribed to Actvest - Alan Hull's newsletter. One of the things that put me off was the amount of advertising included in the weekly newsletter - including his recommendation of Sonray as a broker! I no longer subscribe, but would be interested in whether many of his subscribers have been caught out?

 

[skc]

Guys,

I'm a little confused and I don't trade them so perhaps it's none of my business but aren't DMA CFD's those things traded on the ASX cleared by SFECC ?

Or are they something else on than bucketshop type and exchange traded type (ie. a third type of CFD) ?

No there is a 3rd type called ASX listed cfds.

hello,

a DMA provider doesnt buy/or sell the share, its all smoke and mirrors, advertising spiel

so if you short BHP with a DMA provider what do they do?

thankyou
associate professor robots

What are you talking about?! If I short BHP with a DMA provider, the provider short BHP on the market in their own name, and set up a contract with me to exchange the difference in price.... there are no smoke and mirrors.

But this is the wrong thread to disucss this.

 

[Deerfoot]

I can tell you exactly why we went with Sonray. We subscribed to the Australian Wealth Gameplan written by Kris Sayce. He did a lot of due diligence when recommending shares, and told us of the risks vs rewards, and he highly recommended Sonray, but what he didn't tell us was that there was some sort of payback for him when we used Sonray, nor did he tell us that it didn't matter what shares he recommended if we were going to lose it all through Sonray anyway.

Needless to say, the silence from Kris Sayce and Port Phillip Press has been deafening.

We were sent a small booklet recommending Sonray when we subscribed, but we are having trouble locating booklet as we moved house last year. Does anyone out there have a copy?

I have the booklet as a download but don't know how I could copy it to you. The 2010 updated version has a new lot of recommended brokers. Sonray is not included. (No surprise).

However, with the Sonray recommendation, this note is with it:
"(Note: Port Phillip Publishing receives a referral fee from
Sonray.)"

A "Financial Services Guide" (FSG) is sent as a download when one registers with Port Phillip Publishing: it might help to read it re. legal matters.

Hope this helps.