30% return annually....yeh right!

[BIRMANBOY]

Amazing that we see a constant stream of failed and or fraudulent investment schemes that just keep going on and on and on. Latest one being investigated is Ross Asset Management in Wellington. Evidently a respected advisor and his fund was started in 1989. Unknown what the problem is as its early days but one investor was quoted as saying that annual returns of 30% was not uncommon. Hope its not going to turn out to be another Ponzi. You would think that investors getting 30% returns would be wanting to ask....how the hell can I be getting such a great rate.....Dont mention the war and dont ask questions. Head down, bum up and hold your breath.

[Sauce]

Nice post Birmanboy, I agree.

I have been hearing the rumours about Mr Ross also.

Cheers

Sauce

[BIRMANBOY]

I meant to add, since this is a thread for "investing strategies"...what sort of investor would reasonably expect to get the purported 30%...Is that a smart investor? Does that fall into the OMG strategy. Also more to the point where the devil are the checks and balances and audits done that should prevent these from going on for years. Surely they dont happen overnight? Why is it that this has been allowed to go on and on and on? Not just NZ but everywhere...? You would have thought that every managed fund or investment fund or whatever entity that "takes care of" other peoples money would have to be audited by Govt. CPA every year at a minimum to verify the honesty of their efforts. And if they are WTF ...why are they not being picked up earlier? And if they are not being audited they sure as hell should be. Where is the FMA? This is a list of current cases before the court
Finance Company cases before the Court

---

Current at 3 October 2012
Contents

• Five Star Consumer Finance and Five Star Finance
• Nathans Finance
• Bridgecorp and Bridgecorp Investments (BIL)
• Lombard Finance & Investments
• Capital + Merchant Finance
• Dominion Finance Group and North South Finance
• Belgrave Finance
• Hanover Finance, United Finance and Hanover Capital
• National Finance
• South Canterbury Finance

The system that has allowed this to happen is obviously very badly admiinistered or the laws that it is working with would appear to be inadequate for what needs to be done.

[Lizard]

I had a quick look on the companies office, including all the "other registers" that include unit trusts and the like - could not find published accounts for any of the entities that are listed on the FMA website as covered by this list:

Background
On Friday 2 November, the High Court in Wellington froze the assets of David Ross of Ross Asset Management Limited and the following related entities:

• Ross Asset Management Limited
• Bevis Marks Corporation Limited
• Dagger Nominees Limited
• Mercury Asset Management Limited
• Ross Investment Management Limited
• Ross Unit Trusts Management Limited
• United Asset Management Limited
• McIntosh Asset Management Limited
• Chapman Ross Trust
• Woburn Ross Trust

I would not be too quick to write off the possibility of 30% returns in some years (the guy seems to have been known for investing in spec mining shares, so was working at the end of the spectrum where it may have been possible for a few years with a limited amount of funds, though not for the entire period since 1989). However, I think at a minimum, before I invested in any fund, I'd be wanting to check for reliable auditors, publicly available accounts or prospectus, trustee and registrar... and, these days, an email address and web-site should be the norm for any credible outfit.

The FMA was set up in response to finance company collapses under the "system that has allowed this to happen". That they appear to have been fairly prompt to act in response to investor concerns (first notified in August?), suggests that changes to the system are working.

[BIRMANBOY]

I see the FMA was set up in 2011 so yes appears to have been an improvement on previous situation. Problem seems to be still " stable door closed after horse already bolted". It would be more helpfull if these issues could be picked up before the event and not simply in response to investor concerns. Whatever the rules/laws/regulations are they appear to be either inadequate or not enforced in a proactive manner. Obviously there is responsibility for the investor to do due diligence but smooth talkers and dodgy accounting are the tools in trade for some of these outfits and the average investor is a lamb to the slaughter. There should be annual WOF issued by FMA and it should be stringent, merciless and all encompassing and also paid for by the recipient. THis at least would shorten the time to damage.

I had a quick look on the companies office, including all the "other registers" that include unit trusts and the like - could not find published accounts for any of the entities that are listed on the FMA website as covered by this list:



I would not be too quick to write off the possibility of 30% returns in some years (the guy seems to have been known for investing in spec mining shares, so was working at the end of the spectrum where it may have been possible for a few years with a limited amount of funds, though not for the entire period since 1989). However, I think at a minimum, before I invested in any fund, I'd be wanting to check for reliable auditors, publicly available accounts or prospectus, trustee and registrar... and, these days, an email address and web-site should be the norm for any credible outfit.

The FMA was set up in response to finance company collapses under the "system that has allowed this to happen". That they appear to have been fairly prompt to act in response to investor concerns (first notified in August?), suggests that changes to the system are working.

[CJ]

I have been hearing the rumours about Mr Ross also.

Where his funds audited??

Is that the check that investors should do to confirm that the fund isn't a ponzi.

[BIRMANBOY]

I dont know if they were audited but I suppose an independant accountant should have been able to see potential problems. Not being an accountant I cant answer with any degree of certainty. If there is an accountant on the forum maybe they can shed some light on that. I understand one of the distinguishing characteristics of Ponzi schemes is they are totally reliant on fresh or existing cash to provide "returns" to existing punters. They cannot go on if outgoings to investors exceed incomings. In order to "encourage" fresh funds they always stress cash will grow faster/returns will be bigger if money is left in and further cash put in. The paper work showing big gains is always impressive and optimistic but vague as to actual specifics. Shuffling cash well is all it needs...and willing investors "letting it run". I suppose one defense is periodically taking all of the capital and all of the returns out but generally this is discouraged (obviously). When in doubt...take it out. Also I guess you would ask...if they were audited, by whom and what if any culpability the accountants had?

Where his funds audited??

Is that the check that investors should do to confirm that the fund isn't a ponzi.

[Lizard]

I see the FMA was set up in 2011 so yes appears to have been an improvement on previous situation. Problem seems to be still " stable door closed after horse already bolted". It would be more helpfull if these issues could be picked up before the event and not simply in response to investor concerns. Whatever the rules/laws/regulations are they appear to be either inadequate or not enforced in a proactive manner. Obviously there is responsibility for the investor to do due diligence but smooth talkers and dodgy accounting are the tools in trade for some of these outfits and the average investor is a lamb to the slaughter. There should be annual WOF issued by FMA and it should be stringent, merciless and all encompassing and also paid for by the recipient. THis at least would shorten the time to damage.

Considerable new powers and controls have been put in place with the advent of the FMA and no doubt more safeguards will emerge as time goes on. However, there is always going to be some conflict between risk and freedom to invest as you wish. The more controls are put around what investors can choose to invest in, the more expensive it becomes - and the more everyone is forced down the same, decidedly average path provided by most AFA's and funds.

In the end, it is very difficult to stop anyone taking money off investors illegally if investors are naive enough. However, it is to be hoped that most people who have acquired money have learned a few lessons in the process and understand that a prospectus and audited annual accounts are important documents - and if they don't understand these for themselves, then perhaps they should either only invest with the advice of an Authorised Financial Advisor, educate themselves, or only invest money they can afford to lose.

In this case, I will watch with interest to see what the underlying problem is and how it occurred. I guess we should get the initial report from PWC next week to provide further insight as to whether it was particularly dodgy, or just a victim of neglect as a result of the owner's ill-health (and perhaps a fall in value of the kind of spec mining stocks he may have been investing in).

[Xerof]

Can someone tell me how he was able to take $439m from the public without a prospectus?

was it the same way Hubbard did with Aorangi et al?

[Anonymous]

then perhaps they should either only invest with the advice of an Authorised Financial Advisor.

Can someone tell me how he was able to take $439m from the public without a prospectus?

was it the same way Hubbard did with Aorangi et al?

I understand he did have a prospectus. Do they have to be registered somewhere and publicly available? I also see Ross is listed as an Authorised Financial Adviser on the FMA website.

Will be interesting to see how this plays out.