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Adviser fined for using Ross Asset Management

An investment adviser who lost more than $500,000 through his association with Ross Asset Management has been fined for not disclosing adequate information to his clients.

Thursday, September 26th 2013, 9:41PM 4 Comments

by Susan Edmunds

They went on to lose millions in the collapsed investment scheme.

Almost two months after his hearing date, Rodney Bourke-Shaw has been censured by the Financial Advisers' Discipinary Committee. The decision was issued yesterday.

He ran Oxford Investment Services, in Christchurch, which referred most of its 140 clients to invest in Ross Asset Management. He had been a financial adviser for 14 years.

A complaint was referred to the FADC from the FMA in April, regarding breaches of code standard six, requiring advisers to deal with clients professionally, eight, suitability of advice, nine, requiring a written explanation of investment planning and 12, record keeping.

Two investors were concerned that Bourke-Shaw had not exercised reasonable care in recommending they establish and contribute to a Ross Asset Management portfolio. Bourke-Shaw and his wife had been investing with Ross since about 1997.

His clients invested more than $12 million with Ross through Oxford. When Ross collapsed, Oxford clients had just under $6 million invested there.

Through 2011 and 2012, Bourke-Shaw had concerns about Ross but they were not conveyed to clients. A plan was made for Oxford clients to reduce their Ross investments by 50% within two years. Oxford held meetings with Ross but was unable to get withdrawals processed.

The FADC said clients were unable to make informed decisions as a result.

"It is unlikely that Oxford's clients would know that, by mid-2012, and certainly by August 2012, the Oxford principals held serious concerns about Ross, the operation of RAM's business and potential concerns abou the liquidity of RAM Portfolios."

Not enough attention was paid to clients' needs - even those who said they did not want a risky investment were referred to high-risk Ross investments. Bourke-Shaw referred to them as a lot of retired people who were looking for income. The FADC said it did not seem that any risk analysis or investor profile analysis was being done.

The FMA found that he was also not keeping adequate records of the advice he was giving - just three of five files reviewed had some form of written advice and two only covered initial meetings.

The committee had been waiting for submissions from each counsel before making a decision.

The FADC said it was likely that clients would not have been able to do much even if they had known, and noted that Bourke-Shaw himself was a victim of Ross.

It said he was not directly responsible for the losses that arose because of Ross' conduct. On top of the collapse, he had to deal with damage to his house in the Christchurch earthquake.

But the committee did not agree with his lawyer's opinion that censure was inappropriate. " Although we acknowledge all the factors cited ... it is imperative to denounce any significant breaches of the code so as to reinforce the compliance with the standards."

He has surrended his AFA status and was fined $4000.

« Advisers should be coaches: KneeboneIFA working on pro-bono offering »

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Comments from our readers

On 27 September 2013 at 6:05 pm brent sheather said:
The word scapegoat comes to mind..why does this guy get nailed for not researching RAM when so many other advisers didn't research finance co debentures, CDOs, individual stocks which went bust etc etc.

We have all done dumb things.reminds me of a UK law lord who once said it wasn't important that the law was always right..what was important is that it is consistent.hmmmmm
On 27 September 2013 at 6:11 pm brent sheather said:
More thoughts on this...I wonder if there had been 50 advisers using Ross including some big stockbroking firms whether there would have been any prosecutions...I'm thinking how many people researched Feltex and whether if it happened today there would be any legal action from the regulators.

The lesson is if you are going to do something dumb make sure lots of other people are doing it to.
On 30 September 2013 at 11:46 am CJM said:
Reading the decision I am not sure what to take from it.

So many things seem to have gone wrong it is hard to disentangle exactly what weight the FADC is putting on each problem.

A large part of the decision is that Standards were breached. Clients taken on prior to the new regulation did have the documentation required today and the gaps were never filled in. Whether Ross went bad or not, Standards were being breached.

But AFA monitoring reports suggest these sorts of breaches are fairly common.

I do wonder if the FMA had visited Oxford before Ross was known to be a fraud, whether they would have referred them to the FADC.

In terms of what Oxford should have done with Ross, was the prime issue that Oxford had concerns but did not tell clients? Or clients had too much invested? Or they should never have used Ross? Or they should have been more active in following up redemption requests? Or he should have known it was a fraud?
On 30 September 2013 at 11:52 am Forthright said:
Why can’t some people just let it go? If you prosecuted every Adviser for doing something deemed dumb with 20/20 hindsight there would be no one left to pick on, to show how saintly you are.

Also if you are a share broker subject to the NZ Markets Disciplinary Tribunal and you are found guilty of misconduct, just make sure you make use of the generous name suppression rules. At least the FADC uses transparency, openness and publication to disinfect the advice industry.

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