New action group targets IOM fund industry and regulators for criticism

  • steveejeb
  • 10/10/08 31/05/09
  • a depositor
  • Offline
Posted: Mon, 19/01/2009 - 01:51

A new action group, Premier Shareholders Association (PSA), has commenced a determined lobbying campaign designed to embarrass, among others, the Isle of Man Government and regulators into admitting all has not been well in the establishment, management and regulation of certain parts of the Island’s fund industry; and to pay compensation in the same way as it proposes to for depositors in failed banks.

Much of the group’s criticism has centred on collective investment schemes, and in particular on an Experienced Investor Fund (EIF) - the Premier Low Risk Fund PLC; an IOM registered company and licensed fund.

The group is claiming to have evidence of deception and mis-selling, which it says it has brought to the attention of the company, the fund managers, the auditors, the IOM Financial Supervision Commission (FSC), the IOM Office of Fair Trading, Financial Services Ombudsman, yet they have all rejected any wrong-doing or the need to take any action.

The group has been bombarding officials at the FSC, the Institute of Chartered Accountants (ICAEW), the IOM Financial Crime Unit, the Treasury Minister, Allan Bell and the Chief Minister, Tony Brown with emails setting out their grievances; but it appears their concerns are now falling on deaf ears.

The group has also written to the International Monetary Fund (IMF) who is due to publish a report on the IOM’s regulatory framework later this month.

The group’s main beef is that the fund’s promoters were promising capital ‘guarantees’, and ‘security’, yet when the investors’ capital investment began to ‘shrink’, and they sought to recover their capital, they had to accept an, previously undisclosed, ‘exit penalty’ of about 30%.

The FSC’s view is that somewhere, whether it was clear or not, in the small print, of the offer or contract document, there would have been a clause that enabled the company to make this ‘exit charge’. It also seems their view that investors - who were supposed to be ‘experienced’ investors, but in reality were often pensioners looking to generate some income from their capital - should have been more careful where they put their money and will now have to live with their decisions.

This seems a bit rich when so called professional and sophisticated investment managers piled billions of pounds of customers’ money in to funds run by Mr Madoff and lost most if not all of it.

Incidentally, a very good article appeared on the ‘timesonline’ last week by Edward Fennell, entitled: ‘Fraud: the public are in a mood for show trials of guilty managers’. In it he wrote: “It is still a moot point whether the excesses and light-touch regulation of the past decade actually fostered a culture of fraud or merely allowed it to go undetected….. So in many cases it is the liquidators who are the first to stumble across what may seem like fraud as they peer at all the leakages in the finances. They then call in the lawyers to investigate what has been going on.”

He also identifies hedge funds as having come under particular scrutiny, as this is where some of the fraud has been going on undetected for years, and it is interesting to note that in the latest Quarterly Report on the Island’s economy it states: “There has been some toll on hedge funds particularly in the UK and USA, though the Isle of Man has so far weathered the storm well. The Isle of Man up to end of June 2008 managed an increase in fund assets of close to $4bn, bringing the total to a healthy $58 billion.”

The Manx Herald wonders if the FSC has any idea if any of the people responsible for these funds are running a similar scam to Mr Madoff. To see the full article go to: http://business.timesonline.co.uk/tol/business/law/article5466873.ece

And why should people who invested in savings plans and funds etc be treated any differently to people who put their money, and it could be said, ‘speculated’ just as much, in Kaupthing Singer Friedlander Bank etc?

The Manx Herald would be in favour of ‘caveat emptor’ if it was applied fairly and consistently, but it is not.
However, the Manx Herald certainly doesn’t support the idea of the IOM Government handing tax payers’ money over to everybody that has ‘lost’ money through doing ‘business’ with IOM ‘businesses’; but it certainly does support any campaign that will help the Island clean up its act and improve its image.
[Ends]

Links
http://www.manxherald.com/index.php?news=369

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