Time to frighten the horses

May 5, 2008, 3:19pm,  424 views

For a country that’s arguably over regulated Australia is surprisingly lax in its supervision of financial services.

News came through today that failed Geelong company Chartwell took more than $52.4 million from 150 investors and never actually invested a cent.

Apparently the money was used to repay previous investors.

It’s no consolation to those who were stung that the directors of Chartwell could face jail if convicted of fraud.

As with much white collar crime, the legal wrangling will take years to complete and there will be plenty of loopholes for them to potentially escape through.

Where was ASIC? Why didn’t it ring alarm bells when the dodgy directors promised returns between 20 and 70 percent?

The same ASIC went missing throughout the Opes Prime scandal in which company directors were able to offer their own shares as margin loan security to buy more shares.

These shares were frequently in penny dreadful stocks which serious margin lenders would never touch. It was obviously a recipe to i) inflate the market and ii) crash the market.

Confirming Australia’s laissez-faire attitude towards people spending other people’s money, the other regulator in the Opes Prime saga, the Australian Securities Exchange, was asleep at the wheel besides being a player itself in the market it regulates.

How are these things allowed to happen?

My theory is Liberal governments ignore financial regulation because they’re looking after their mates.

Labor governments ignore the sector because they don’t understand it and they don’t want to frighten the horses. Time for that to change.

And why is Geelong a magnet for financial crashes; remember Pyramid?