News
David Ross loses bid to get out of jail earlier
Thursday 26th of June 2014
Ross was originally sentenced, in the Wellington District Court, to 10 years and 10 months for the fraud he perpetrated through Ross Asset Management.
The court also ruled Ross must serve at least five years five months in prison. Earlier this month Ross appealed against his minimum non-parole term with his lawyer saying it should go down to just four years.
But Appeal Court justices Christine French, Jillian Mallon and Geoffrey Venning have dismissed that appeal.
The Financial Markets Authority and SFO - who took the case against Ross - said they welcomed the decision.
"We believe that the decision to uphold the original sentence reflects the seriousness of Ross's criminal offending and the significant harm that his behaviour has caused to investors," they said in a statement.
At the time of Ross's appeal the spokesman for Ross Asset Management Investors Group, Bruce Tichbon, expressed anger that victims could not join the appeal and argue for a longer sentence.
He said group members were angry at Ross' lawyer "having the cheek to appeal".
"Ross in many ways seems to get better treatment than his victims," he said.
Comments (21)
Allen Hoffman
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.
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10 years ago
Brent Sheather
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.
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10 years ago
alan clarke
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
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10 years ago
alan clarke
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
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10 years ago
Brent Weenink
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?
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10 years ago
alan clarke
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
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10 years ago
Brent Sheather
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.
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10 years ago
alan clarke
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)
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10 years ago
Brent Weenink
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.
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10 years ago
Brent Sheather
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.
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10 years ago
David Whyte
I believe Alan used the phrase "a lot less likely" - he did not state that a platform was incapable of being abused.
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10 years ago
Alan Schofield
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.
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10 years ago
Brent Sheather
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?
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10 years ago
alan clarke
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 ……………
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10 years ago
Alan Schofield
"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.
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10 years ago
alan clarke
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".
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10 years ago
Brent Sheather
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.
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10 years ago
Brent Weenink
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?
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10 years ago
alan clarke
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
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10 years ago
alan clarke
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."
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10 years ago
Philip Macalister
Guys, I think we will close comments on this piece. However, look out for an update on this issue in the near future.
P.
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10 years ago
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