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Ross pleads guilty

Wellington financial adviser David Ross has pleaded guilty in the Wellington District Court to charges laid by the Serious Fraud Office (SFO) and the Financial Markets Authority (FMA) and remanded in custody.

Thursday, August 29th 2013, 10:51AM 7 Comments

A joint agency investigation between SFO and FMA into Ross Asset Management (RAM), and related entities, led the SFO to charge Ross on June 13.

The charges were four counts of false accounting and one count of theft by person in special relationship.

Then FMA charged Ross with one count of providing a financial service when he was not registered for that service, one count of knowingly making a false or misleading declaration or representation to FMA for the purposes of obtaining authorisation to become an AFA, and one count of supplying information or producing documents to FMA which he knew to be false or misleading.

The investigation into RAM and its related entities commenced in October last year when FMA received complaints from investors who had been unable to withdraw funds. FMA took immediate action to preserve investors’ funds by obtaining asset preservation orders and appointing receivers and managers to RAM and its related entities. A joint investigation with SFO subsequently commenced. 

The SFO charges alleged that Ross conducted a Ponzi scheme which he disguised by falsely reporting clients’ investments. Large portions of client portfolios shown as invested through a broker "Bevis Marks" were fictitious and never existed, resulting in an overstatement of investment positions by more than $380 million.

More than 1,200 RAM client accounts have been affected by Ross’ scheme.

SFO acting chief executive Simon McArley said: “While a guilty plea does not address the significant losses incurred by a large number of victims, it will bring some relief to those victims. SFO and FMA have worked well together, applying their respective specialist skills in order to progress the investigation quickly and enable this timely outcome.”

FMA Head of Enforcement, Belinda Moffat said: “The financial adviser regime relies on advisers providing truthful information when they apply for any licence and Ross’ conduct has seriously undermined the integrity of that regime. We are committed to restoring investor confidence and will continue to respond immediately to investor complaints against market participants.”

Ross has been remanded in custody to reappear on 24 October to set a sentencing date.

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Comments from our readers

On 29 August 2013 at 6:13 pm billy the broker said:
At a max he will get 4 years and be out in 2...slap on the wrist.....no doubt he would have ferreted funds elsewhere.....well done FMA!!
On 30 August 2013 at 11:06 am Barry Milner said:
Billy, get your head out of the sand, take the scales from your eyes and you may realise the FMA is NOT responsible for Ross's rort, he was at it for many years, long before the FMA came into existence. Whether he gets 4 years or 40 is not in the realm of the FMA either, but is firmly the remit of the judicial system and the individual judge trying the case. The FMA surely deserves some recognition for helping to bring him to justice and does not deserve to be criticised for the fact that he was able to operate for so long. I understand that Ross is a chartered accountant, doesn't the accountants society bear some responsibility for their failure to audit his practice? or are they able to just wash their Pilate like hands?
On 30 August 2013 at 3:40 pm David Whyte said:
Fair comment Barry. The FMA, advisers, and consumers have been poorly served by legislation that hasn't achieved its objectives. As a chartered accountant, Ross failed to meet the professional body's standards, yet this was not picked up until after the event, if at all.

The perception that the FMA is somehow responsible, is, as you say, inappropriate.

However, they sometimes don't help themselves by apparently exceeding their remit in attempting to re-write and re-interpret the Code of Practice and ignoring the legislative/regulatory framework laid down.

I understood the FMA were, among other duties, the body entrusted with supervising adherence to the Code of Conduct by those subject to the Code provisions. Setting the standards contained in the Code was - again please correct me if I'm wrong - the responsibility of the Code Committee.

So if they seem to extend their authority over matters apparently beyond their remit, it's understandable that some might choose to allocate blame - however incorrect this may be.
On 31 August 2013 at 9:18 am billy the broker said:
Two fair opinions...without any head in the sand interpretations.
On 31 August 2013 at 12:15 pm Ivan said:
Ah Barry I think you will find that the FMA is in some way responsible, as they gave him a licence to operate, and the FMAs CEO is on record as saying that he is personally responsible for that. I think you will find some legal action will be pending against the FMA at some stage in the future, and rightly so.
On 1 September 2013 at 9:50 am brent sheather said:
From memory accountants didn't have to complete Standard Set C which,again from memory, is designed to show that you can practically give sensible investment advice. This might have highlighted a problem.

The Code Committee gave accountants this exemption and also gave lots of other groups with chequered histories the same exemption.

That's where the blame lies and that's what needs to be fixed, amongst lots of other things.

We need to replace some members of the Code Committee with people with some knowledge of best practice.
On 3 September 2013 at 8:32 am Bob said:
Barry?? more to the point - what on earth is a Pilate? is that like a modern day Yoga instructors hands? not sure what you mean there?

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