[Weekly Wrap] Where's the money gone?
Receivers John Fisk and David Bridgman of PWC have found only $10 million of funds, despite client accounts showing just under $450 million invested on behalf of 900 clients. If this did turn out to be a ponzi scheme (and receivers haven't made their minds up yet) it would be the largest in New Zealand history and would dwarf the amounts involved in recent fraud convictions of Jacqui Bradley ($15 million) and Evan Paul Cherry ($5 million). Ross is still in hospital, reportedly with head injuries.
The sad saga is a real set back for the advisory and funds management world as it embraces regulation and strives to increase its public perception. One of the things we have been told so many times is that the government regulated the sector to increase investor confidence.
The Ross saga raises many questions including why this "scheme" wasn't picked up earlier by regulators. For instance, Ross managed to become an authorised financial adviser (AFA), apparently without any alarm bells going off at the FMA. All the nitpicking about advisers' paperwork looks pretty insignificant compared to what looks like a $400 million-plus fraud.
But is it fair or realistic to expect regulators to stop every situation like this? Perhaps more effort needs to be put into investor literacy? If anyone claims to be able to achieve returns of 30% per year this should be an instant warning sign that something is fishy.
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