David Ross loses bid to get out of jail earlier

If they wanted to impose an onerous sentence, they could have required him to read FMA's guidance on class DIMS and then go through the process of applying for a class DIMS license.

Good point Justice and then they could turn down the bid for a license on the basis that he hadn’t updated his clients’ needs and objectives for 5 minutes … or …. and this is probably illegal under the Geneva convention …. they could have required him to do all the exams to become an AFA which as we all know is soul destroying because it involved guessing which wrong answer the stupid people who put the exams together thought was right and then recommending stupid alternative investment products for the same reason. Thank goodness that is over and done with.

Lilly livers. A full AML/CFT review is the only thing that is going to act as a deterrent.Nothing like 20 odd page document of complete and utter nonsense that seemingly serves no purpose to make you leap out of bed in the morning.

Or better yet all three of the above, which incidentally will do nothing to prevent another David Ross.

In seriousness though, thoughts with the victims here.

There will be another one

But a lot less likely if everyone was required to use a platform

Sorry chaps, got my ear muffs on and can't hear your objections

And if all advisers who handle investments were required to use platforms, the cost would get down to 12-15 bps

With many many advantages to offset that(very low)cost

Law office worker steals nearly $469,000 over 40 years

Investigators found that her offending was "extremely complex" and she'd used the seven accounts to launder the stolen money.

A further 38 client accounts were found to have funds siphoned from them.

Her method involved her taking a portion of funds deposited to the firm and putting them in her own bank account. Often she would create bogus client requests, sometimes coupled with a legitimate transaction for the client.

Even in 2014, this can still happen, but it can't happen for investors whose advisers use a platform

Alan, you never answered my question about prime broking accounts. Can you confirm that Aegis and the underlying custodians aren't using prime broking custodial accounts? Have you sighted the paperwork? Is there someone at Aegis that can confirm the position and provide a copy of the custody agreements?

Not sure what your question is

Aegis are not likely to answer to a nom de plume so suggest you contact them direct

However I can tell you that Aegis is the operating company & ICSL is the custodial company /bare trustee and cannot incur any debts

Aegis belongs to ASB and obviously is subject to bank like audits

We use external asset allocations. We don't have a trust account. All our client monies flow to direct to Aegis. We mainly use DFA unit trusts that have trustees protecting the investors interests. We also use a little of NZX50 and NZ LPT's that have been around for over 10 years, and are subject to NZX rules.

That's 4-5 levels of protection Mr Ross's clients badly needed but didn't have

The law employee theft case above is a reminder. The more levels of protection for our clients money we can put in place, the better it will be for all concerned

One question I have Alan is what bid/offer spread yr clients typically endure when the deal in closed end funds and etfs locally.im sure what with putting the clients interest first and all that you monitor these things..who executes yr trades..that info is vital in NZ.

The discussion is about preventing another Ross type fraud and not fees

If an adviser's clients hold investments themselves, and the adviser is dishonest, or has dishonest staff, and handles Computershare statements, and FINs, and/or does a lot of paper work for less-than-savvy clients, the Te Awamutu scenario of siphoning off cash via multiple bank accounts could be repeated. The person would have to be clever, but then they usually are

This can't happen with a reputable platform

As regards fees, NOT really this column, but our plan fee is under $300, our entry fee is nil, we don't take commissions, and buy/sell with DFA, currency transactions and brokerage for NZX50 and LPT's to set up a portfolio totals about 0.3% ($300 per $100,000)

I'm sorry, but I can't let these comments of Alan Clarke remain unchallenged in this forum. It is absolutely not true that a platform is incapable of being used or abused by fraudsters. His contention that a platform is better than a direct equity holding with allocated FINs and CSNs, and the usual direct communication between share registry and the client is equally incorrect. Both are as vulnerable as each other to advisor or third party fraud. Neither is impregnable.

I'm sorry Alan but you are being very naive in your claims. A very quick google search proves this immediately with instances in the UK of platform fraud in 2013 amounting to UKP$1.8M. http://www.moneymarketing.co.uk/2009821.article?cmpid=pmalert_271644. Even without this, common sense and experience dictates that the means and variables of fraud mean any system has potential for abuse – particularly where an authorised agent, such as an advisor, is involved.

Good stuff BTW and he hasn’t commented on the spread his clients pay to deal in ETF’s or closed end funds. I wonder what broker he uses. It would be good to know. If the transactions are automatically completed by a computer then I would guess that the spreads his clients could be paying would make brokerage look almost irrelevant but we don’t have any info at the moment.

I believe Alan used the phrase "a lot less likely" - he did not state that a platform was incapable of being abused.

DW, I see "Even in 2014, this can still happen, but it can't happen for investors whose advisers use a platform" and "This can't happen with a reputable platform". That is not "a lot less likely". Hope these statements are not being made to clients.

Yet another thing – my NZ shares are registered in my own name and if someone sold my shares without my permission I would get an email contract note from the broker within a few hours of the transaction occurring and an email from the registry within a few days which would alert me to the transaction. Does this happen with a platform?

Thank you R1, you are correct – I should have said;

“It is near-to-impossible to create a Ponzi scheme on a platform”

“It is highly unlikely that a fraudster or thief could steal a clients money from a platform”

“It is a lot easier for a crooked adviser or staff member to steal clients money where the adviser firm handles investments owned by the client”

Evan Cherry $4.7 million, Ross $450 million, Stephen Versalko $17.8 million

Versalko said stealing from customers was so easy that anyone could have committed the offence

These crooks did our industry a huge amount of harm, and the best thing we could ALL be doing is continually looking for ways to make our clients money MORE secure.

Using a platform is one way to add a significant level of security

Cleary some of you use low costs as your unique selling point (USP) but 25 to 40 basis points (tax deductible) to add a significant level of protection is hardly an imposition

Ask those investors who lost it all what they think

If one of your people does manage to steal some of your clients money, your business may well collapse too – think about it, the FMA and police all over you, clients upset and leaving, all because you tried to save your clients a miserable tax deductible 30 basis points

Anyway we are supposed to put our clients interests first – surely that includes security of their money

Brent – these guys are cunning and will target your clients who don’t use email, and may be away, or are elderly /infirm

I have worked with clients owning investments for 18 years and then solely used the Aegis platform for the last 7 years - when it comes to efficiency, just no comparison at any level.

And less administration in your office, so less staff to hire and manage, so less staff honesty to worry about too. That in turn gives you more time to work on what is important …………………….

I could go on ……………

"Using a platform is one way to add a significant level of security". Direct ownership of assets is another. When will we hear about a platform employee defrauding its users? Where people are involved fraud is always possible and where people aren't involved they will find away to get involved if they are fraudsters; hacking, etc. Direct ownership is my preference too Brent.

Remember chaps (unlike you) I have used both systems

18 years direct ownership

7 years Aegis

I can tell you there are dramatically less loopholes within Aegis for an advisers staff member to steal a clients money

Further Aegis belongs to ASB and has bank like audits. Do you ?

And if the bad day comes that an Aegis staff member does manage to pilfer some money, its a pretty sure bet ASB will make it up.

Can you afford that if it happens to you?

And back up - Aegis custodial systems vs direct owners - houses do burn down, get flooded, burgled, docs stolen by caregivers, docs lost in mail, forgotten etc etc

and then tax reports - Aegis reports are such that most end of year tax filing is simple - accountancy bills reduced too

And the adviser is freed up so much that he/she can do more productive work for the client

And the adviser can rebalance / alter/tweak portfolios so easily and quickly, again to the benefit of the client

And the adviser can set up a monthly fixed payments via the cash account - my clients who needs income love it.

And Aegis treat me like a valued customer - so we have an excellent working relationship

And money and investments can only be paid out or transferred to the account holder - no one else

I have used both and it's like;

Ford Prefect vs a Mercedes B200

Fordson Major vs a Massey Ferguson

Bell 47 vs a Jet Ranger

I have several hundred hours on all of these machines

Huge progress to the benefit of all

Like they say in the Guinness advert "maybe you don't like it 'coz you never tried it".

Alan, you have left out the most important advantage of Aegis to advisers and that is that it gives you a system within which to transact your business and …. your clients pay for it.

No wonder it’s so popular!

The alternative is that the adviser has to purchase the infrastructure but the upside of that strategy is that it is small a one-off cost which the adviser pays for as opposed to mum and dad paying for it forever.

I think if you let your clients decide which option they would go for they would probably opt for keeping the Aegis costs in their own pockets.

I don't understand how advisors can be promoting Aegis if they don't know their custody terms, or, more importantly, the terms by which their underlying custodians hold the stock, particularly the overseas stock or funds.

Are they held on prime broking terms or not?

I've asked Aegis, but they don't answer so I have to assume the worst. For readers who don't know what I'm concerned about I enclose a link FYI.http://en.wikipedia.org/wiki/Prime_brokerage

Its wiki - but still relevant and quite helpful. I'm not being deliberately argumentative - but I've been trying to find this answer for some time, so I'm hoping someone in this forum like Alan or bill or anyone who deals with wrap platforms can assist?

If it is held on proper custodial terms (non-prime) then I don't understand why it is such a secret?

from Wiki

"Prime brokerage is the generic name for a bundled package of services offered by investment banks and securities firms to hedge funds and other professional investors needing the ability to borrow securities and cash to be able to invest on a netted basis and achieve an absolute return."

Aegis do not offer products - so this question is irrelevant

Sorry to disappoint guys...but irrelevant of platform if the person is desperate to steal they will find a way....simple as that.

Charlie the client calls Alfie the AFA

"I hear one of your staff has stolen my money. How much have I lost ?"

Alfie " yes sorry, they stole $300,000 - 75% of it"

Charlie" **###. My mate Bill has his money in that Aegis outfit, via ASB. If one of their staff stole some, ASB would very likely make it up. Why don't you use Aegis ?"

Alfie " because they cost 0.25% pa"

Charlie " #*#*# I would rather have paid 0.25% pa. than lost $300,000. Can you make up my losses?"

Alfie - " don't know yet, I will have to ask my insurers"

Charlie " can you afford to make it up ?"

Alfie "Sorry I have to go -the FMA and the police are here."

Guys, I think we will close comments on this piece. However, look out for an update on this issue in the near future.
P.