FMA Review Asks ‘Stakeholder’ Mates – Not Customers

In a bizarre move the Financial Markets Authority has done a review of itself, talking to the industry bodies it works with; but forgetting to talk to its customers (that’s us).  The resulting report can be seen here.  It is good self promotion by the FMA.  We believe the report is an attempt by the FMA to do damage control and bolster its credibility in the wake of the RAM collapse. Our media release in response is here.

The FMA report does contain some very interesting comments, confirming there was widespread knowledge in the adviser industry of what Ross was up to.

“There were investment managers around town who lost clients to Ross Asset Management–they knew and should have raised a flag. The industry is relationships driven and having relationships within this community could have served to alert the FMA of Ross Asset Management” –Industry body stakeholder Page 26

“There are bigger fish to fry – there may be more Ross Asset Managements out there” –Private sector stakeholder Page 26

“Some stakeholders indicated that Ross Asset Management’s practices where known to many people in the advising industry and that if the FMA were networked at this level, they would have been informed informally, while others disputed this”.   Page 26

“Ross Asset Management was commonly quoted as an example given the role of a lack of custodian independence in enabling his scheme to operate for so long” Page 38

For the record from May 2013 “Suggestions the Financial Markets Authority knew about David Ross long before his business was raided were “crap”, the regulator’s chief executive told a conference this morning. Read more here.

Posted in FMA

Competing Views – RAMIG and the FMA

The following two opinion pieces appeared on the same page of the Dominion Post 16/11/13, the day after Ross was sentenced, but both were written several days before.

The FMA opinion piece contains another apology from Sean Hughes, chief of the FMA.  He also states “no regulatory framework is a perfect foil to misconduct”. Read here

The RAMIG opinion piece highlights the regulatory failure that has occurred and the urgent need for the authorities to show some lead on how to fairly unwind the mess. Read here

NZ Herald – FMA slams Ross allegations

By Hamish Fletcher 1:10 PM Tuesday May 14, 2013

Suggestions the Financial Markets Authority knew about David Ross long before his business was raided were “crap”, the regulator’s chief executive told a conference this morning.

“Let me very clear about this because there have been some assertions and some whispering campaigns that everybody knew about Ross and that we were too slow to act. I’m standing here before you today to say that it took one phone call, one, for us to take action. Any suggestion that we knew about Ross beforehand is crap,” FMA head Sean Hughes said at the 2013 Forensic Conference in Auckland today. Read more

Bloomberg – Madoff investors can’t sue SEC

There have been constant calls from RAM investors to sue the FMA in NZ for failing to follow up on multiple warnings over the years that RAM was fraudulent. Our advice has been its hard to sue the NZ government and RAMIG’s efforts for now would be better used elsewhere.

The following press from the Madoff case in USA shows the same problem there, the federal Appeals Court refuses to support a suit against the Securities Exchange Commission (or SEC, the equivalent of the FMA and its predecessor the Securities Commission in NZ). This is despite the SEC being given multiple warnings on Madoff, and doing multiple investigations of Madoff and failing to find anything wrong.

In NZ the FMA and the Securities Commission, as far as we know, did not even investigate Ross Asset Management, despite multiple warnings.

However, other aspects of the US law are still of interest to RAM investors. The US courts vigorously pursue claw back in Ponzi cases, and in this regard they set a common law standard for the NZ courts to specifically accept or reject.



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Text here abridged.

Bernard Madoff’s investors can’t sue the U.S. Securities and Exchange Commission for failing to uncover his massive Ponzi scheme, a federal appeals court ruled.

The regulator’s “regrettable inaction” is shielded by law, the New York-based appeals panel said today, upholding a lower-court decision to dismiss suits in which investors accused the SEC of negligence.

“Despite our sympathy for plaintiffs’ predicament (and our antipathy for the SEC’s conduct), Congress’s intent to shield regulatory agencies€™ discretionary use of specific investigative powers€ defeats the investors€™ claims, the court said.

The SEC’€™s inspector general found in a 2009 report that the agency had failed to make a €œthorough and competent€ investigation of Madoffs firm, Bernard L. Madoff Investment Securities Inc., despite having received detailed complaints.

Dominion Post: Ross Asset Management failure spurs changes

Comment: Quote in article below:  “The FMA had no intelligence on executive chairman David Ross before his financial adviser authorisation. Little existed in his application to indicate he was a risk.”

Does this seem credible from the FMA, considering the authorities had been getting written warnings about David Ross 3 years ago? Further, the FMA taking his financial adviser application without questioning it has clearly helped lead to the disaster many of us now find ourselves in.

The government has a lot of work to do to restore confidence in the NZ finance markets, and to restore the credibility of the FMA. Statements like this seem to indicate a lack of integrity, judgement and direction.


Dominion Post: Ross Asset Management failure spurs changes
Last updated 05:00 10/01/2013

The collapse of suspected Ponzi scheme Ross Asset Management could prompt changes to legislation which treats Kiwis with $500,000 to invest the same as banks or professional investors.

Parliament is expected to pass the Financial Markets Conduct Bill later this year, which, Commerce Minister Craig Foss said, was “critical to restoring investor confidence in New Zealand’s financial markets”.

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NZ Herald: FMA has eye on managers

Ross Asset collapse has highlighted the risks of controlling individuals’ investments.

The investment watchdog says it is taking a vigilant approach to financial advisers who manage their clients’ money on a discretionary basis since the Ross Asset Management collapse but can’t rule out other cases of poor management.

Read the Story …