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Tidy up from the top down

Friday, March 25th 2011, 6:30AM 8 Comments

by Philip Macalister

My heart sank this week when I switched on the television news and read the business papers of the Herald to see the faces of three directors of Nathans Finance in court. It’s not that I had money with this company or there were thoughts for the investors in this, or other, failed finance companies. No, it was seeing the face of one of the life members of the Institute of Financial Advisers, Roger Moses, in court again on charges over an investment scheme. Whenever this happens it feels like Mr Moses is bringing the industry into disrepute. (For the record he and two other Nathans directors have pleaded not guilty and in the earlier case concerning a contributory mortgage scheme he was eventually cleared). This court cases is happening at time when all these regulations are going on to try and tidy up the industry and help regain investor confidence. I have written about this before as it is an issue which is a concern for advisers and the IFA. However, when I was driving to the airport this morning listening to sports commentator Joseph Romanos talking to National Radio, I wondered if I should even raise this issue? He raised the topic that everyone was allowed to criticise sports people on their performance, call for heads to roll when losses happen, but it was not OK for players to criticise match officials. The view that emerged is that people should be able to express their views and that the “disrepute” line with players criticising officials was a bit over the top. Maybe I shouldn’t raise the issue as not many people outside the advisory world will put the trial together with the IFA? But then maybe the IFA should lead by example and remove people from its organisation which cast a shadow on all members?  
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Comments from our readers

On 28 March 2011 at 10:22 am Alan Read said:
To develop your theme further Phil, it could also be suggested that the match officials (eg Regulators) were not really monitoring whether the players were following the rules during the playing of the game, and in fact was there a referee present during the game? And my comments in no way endorse foul play without penalty.
On 28 March 2011 at 3:01 pm Forthright said:
Mr Moses was originally granted IFA life member status, for his record of extraordinary service to the IFA council, board and committee level for more than 10 years. Mr Moses should be rightly congratulated and honoured for his service to the profession.

Mr Moses retained his Life membership status after the 2001 Security Act charges were dismissed. Mr Moses has obviously continued to retain his IFA Life membership status during the latest round of charges due to his compliance with the IFA constitution, bylaws, code of ethics and practice standards.

I also understand the IFA refused to conduct an enquiry into Mr Moses adherence to the IFA constitution, bylaws, code of ethics and practice standards when he was charged in 2001. I wonder whether the IFA has any willingness to make any enquiries this time. Perhaps a Good Returns journalist ought to ask IFA the question.

I am sure a lot of people associated with the IFA would agree with Phillip’s view, of not raising the issue as not many people outside the advisory world will put the trial together with the IFA. However what would this say about our professions need for transparency and being seen to be proactive and good corporate citizens?

In my view, there will be nothing but regret for the profession over this matter, whatever the outcome maybe. There will be no positives, which will increase investor confidence in the profession.
On 29 March 2011 at 6:29 am Murray Weatherston said:
Whatever happened to the presumption of innocence?

In the contributory mortgage case mentioned, Roger was acquitted on all charges. What if he had been stripped of his Life membership when the charges were first laid?

In the Nathan case, the matter is still before the Court. Any action by IFA must surely wait until the legal process has run its course The trial is barely started - week 1 of an expected 8 week trial.
On 29 March 2011 at 4:55 pm Forthright said:
Murray you raise a very good point. However innocence under law and innocence under ethics is two very different things. Law functions as a system of externally imposed constraints on behaviour, whereas ethics functions as a system of self-imposed principle constraints.

Just because you are innocent under the rule of law, don’t necessarily make you innocent under a principle based code of ethics and practice standards. If you breach a code of ethics or practice standards, it does not follow that you have broken the law. Therefore it follows that being innocent under the law, will not prevent you from being judged on whether you breached a code of ethics or practice standards.

But we will never know the answer unless the IFA is prepared to conduct an inquiry into the Life Members behaviour against the IFA code of ethics and practice standards.
On 30 March 2011 at 1:52 pm Cluedup said:
Financial advisory is no different to politics; public perception and confidence is key. Just look at the Darren Hughes case. Should advisers find themselves in front of the courts they ought to be suspended from regulatory bodies such as the IFA immediately, in order to save the reputation of other members. In fact, it is only right that the adviser who's name is bought in to disrepute stand down of his/her own accord in the interests of the wider financial advisory community.
On 31 March 2011 at 3:49 pm Murray Weatherston said:
Dear Forthright

You seem to have very strong views on this subject.

So why don't you walk your talk and become the complainant to IFA that will kick-start their disciplinary process. You will need to specify in your referral which provisions of the IFA Code of Ethics you allege have been breached.
On 1 April 2011 at 9:36 am Forthright said:
I would have thought, given the serious nature of the allegations against the IFA life member, the IFA might have asked their professional conduct committee to proceed under Rule 32.1.a:

“to inquire into and investigate matters of professional conduct of Members whether arising from complaint or on its own volition;”

The IFA code of ethics tells us, objectivity requires intellectual honesty and impartiality, I suspect for the IFA to precede “on its own volition” may require much of the former middle elements.
On 14 April 2011 at 10:18 am Andy said:
As professionals in our chosen fields, the biggest threat to our business is not legislation, ethics, or the codes; it is the media.
Regardless of innocence or guilt, the second our names are mentioned in the same sentence as court or charges, the public will judge us and our professional memberships in a negative light.
The choices are limited - our Professional Body could suspend membership immediately to limit damage to them, but the public would only see that as further evidence of guilt.
In the many cases where an adviser was innocent right the way through, the damage done in loss of business can still be crippling to both the adviser and the profession.
So my question remains - will the new legislation actually give any more protection to consumers, advisers, or the economy; or will it destroy further the reputation of the financial adviser industry, and turn people towards a DIY attitude - one without educated advice and recommendations, in turn bringing further risk of losses to investors putting their money into "a supposed good deal" on the advice from a mate?
Whether Roger Moses is guilty or not is not for me to judge. The concern is that the public sees Mr Moses as a life member of a respected organisation. What does that do for public confidence in 1) the principles of the IFA, 2) the ability of the IFA to vet its members, and 3) the integrity of other IFA members?

Suggestions anyone?
Commenting is closed



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