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Ali Moore speaks with Denise Brailey
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Australian Broadcasting Corporationd
Broadcast: 26/03/2007
http://www.abc.net.au/lateline/business/items/200703/s1882142.htm
Ali Moore speaks with consumer advocate, Denise Brailey, about the current climate surrounding property investment companies.
Transcript
ALI MOORE: One person who's been keeping a close watch on Fincorp is Denise Brailey, a long time consumer advocate who works for litigation manager IMF Australia. IMF has funded four class actions over Westpoint, another property investment company that failed. I spoke to Denise Brailey earlier this morning. Denise Brailey, welcome to the program.
DENISE BRAILEY, IMF SPECIAL PROJECTS MANAGER: Thank you, Ali.
ALI MOORE: Fincorp is a funds management and property investment group. What's gone wrong?
DENISE BRAILEY: Well, it's obvious that investors are going to be in for some terrible times, with knowing their capital has more than likely gone and their income has stopped.
ALI MOORE: Do we know why?
DENISE BRAILEY: We certainly know from the past - when I was looking at this company in 2004, their advertising left a lot to be desired in enticing people to invest with them.
ALI MOORE: We don't know, though, exactly what's happened to the money?
DENISE BRAILEY: No, that'll be for the administrators to work out towards the end of the week. There are some assets but I also understand that there are banks involved which - other lenders, which would come ahead of the investors, of course.
ALI MOORE: You talk about advertising. Who was the Fincorp product targeted at? Who was the average investor?
DENISE BRAILEY: There was no doubt in my mind that it was targeted at the average retiree, people with significant amounts of money to invest but probably had only recently received those funds and were looking somewhere safe and secure. These were not people that normally invested on the stock exchange, for example.
ALI MOORE: You would argue, in fact, these were high risk products?
DENISE BRAILEY: Definitely, they were high risk products but they were being touted as low risk, as per the tone of the advertisements.
ALI MOORE: Can you give us a flavour of those ads?
DENISE BRAILEY: Yes. One of them was of a chap snoring, saying - with a commentator saying, "Listen, isn't that a beautiful sound? It's the sound of a Fincorp investor sleeping soundly, knowing that his investment is safe and secure".
ALI MOORE: This company did, in fact, have action taken against it a couple of years ago, over misleading information in a prospectus. Is it just a case of buyer beware?
DENISE BRAILEY: I think the buyer beware should be really that the buyer needs to beware financial products are complex and beware that ASIC doesn't prosecute most of these cases. I know that there are 12 suspect raisers of funds that have been aggressively promoting their financial products for the last three to four years. I've notified ASIC of this list. So there's two down and 10 to observe.
ALI MOORE: So what concerns you? Is it not so much the product itself but the way it's sold as low risk, not high risk?
DENISE BRAILEY: Indeed, Ali, you've hit the nail right on the head. There's no law against having a high risk product out there. That's how markets tend to work. But there is an abhorrence from the public and community at large that you would ask a retired couple to place something they've worked 40 years for and put it in - making them believe it was a low risk situation. That's appalling.
ALI MOORE: Given that ASIC can't hold the hand of every investor, why do you say they've not been sufficiently active?
DENISE BRAILEY: I think the proof is there wouldn't be so many people out there running these types of businesses of raising funds without regard to the risk factor, if ASIC was more vigilant. I think what ASIC needs to do, and I've discussed this with them in the past, is set out a model of what constitutes high risk product, and anything above 8 per cent, to look at seriously, is this going into a high risk category.
ALI MOORE: I know you've been involved in some of the wash up of the Westpoint actions. Do you know of any of the investors who put money in Westpoint would have also put money into Fincorp?
DENISE BRAILEY: Indeed we do know of a couple of people and I'm sure where there's some there will be others.
ALI MOORE: They face a double whammy?
DENISE BRAILEY: Yes, those people probably had money in Westpoint, money in Fincorp and maybe one other one that maybe suspect on that list, and it means that their retirement is looking grim at this stage.
ALI MOORE: Denise Brailey, many thanks for talking to us.
DENISE BRAILEY: You're very welcome.