David Ross charged over $400 mill ponzi scheme

David Ross has been charged with false accounting and theft by a person in a special relationship – and financial advisers are in for a warning from the FMA about DIMS.

Thursday, June 13th 2013, 10:45AM 8 Comments

The Serious Fraud Office alleges the 63-year-old operated a $400 million Ponzi scheme.

The SFO and FMA investigation into Ross Asset Management and related entities commenced in November last year after complaints were received regarding delayed or non-payment of funds to investors.

FMA obtained asset preservation orders and orders appointing receivers and managers to the Ross Group of entities. Initial inquiries by receivers showed investments of only $10.2 million actually existed.

The charges laid by SFO allege that Ross conducted a Ponzi scheme which he disguised by falsely reporting clients’ investments.

They allege that large portions of client portfolios shown as invested through a broker “Bevis Marks” were fictitious and never existed, resulting in an overstatement of investment positions by more than $380 million.

More than 1200 RAM client accounts have been affected by Ross’s scheme.

Investor representative Bruce Tichbon said three times as many investors lost money as made money through Ross.

SFO’s acting chief executive, Simon McArley said: “The allegations made amount to serious criminal matters. However the saddest fact of all of this is the position that Ross’ clients find themselves in.”

FMA head of enforcement Belinda Moffat said the FMA would now complete its investigation under the Financial Advisers Act. “We will also shortly release best practice guidance for financial advisers providing discretionary investment management services to ensure our expectations are well understood by advisers, as well as guidance for investors considering using such services.”

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Comments from our readers

On 13 June 2013 at 11:30 am Concerned Stakeholder said:

I wonder just how long 'shortly" will be as per the quote from 'Belinda Moffat said the FMA would now complete its investigation under the Financial Advisers Act. “We will also shortly release best practice guidance for financial advisers providing discretionary investment management services to ensure our expectations are well understood by advisers, as well as guidance for investors considering using such services.”
You will probably get a 12 page Guidance note for AFAs and the public guidance about 9 pages long. I am sure that the AFA population will devour the content but do they really think the general public will read a 9 page guidance note. If the FMA wants to effectively engage in education then their are probably more effective means than issues "Public" Guidance notices that very few will read. Where is all the promotion of AFA as the minimum standard after all we haven't had anything since the famous 'Cowboys" campaign and we all know how much that influenced the confidence of the public in using AFAs don't we(sic)!

On 13 June 2013 at 1:00 pm Mac said:

There should be a clear demarkation between AFAs who use a third party for investment fund management (e.g. a WRAP account provider) and AFAs who have a direct involvement with investment fund management (e.g. David Ross).

On 13 June 2013 at 1:24 pm Ally said:

The FMA needs to front up to its share of the blame for the Ross fiasco. More specifically, the Code Committee, which set the rules that allowed Ross to slip into AFA status via the back door exemption of being an accountant. This is particularly galling for all the AFAs who had to pass the Standard Set qualifications. The Code committee should do the right thing and resign ...

On 13 June 2013 at 5:32 pm traveller said:

all the exams in the world won't stop people who have no ethical standards or morality.

On 14 June 2013 at 7:26 am Jeff Goldsworthy said:

"Granfathering" - the old practice of permitting qualification without assessing process and ability against current standards - I trust (hope)this will now cease once and for all. It failed in the past and has clearly failed again.

On 14 June 2013 at 8:20 am Be good said:

David Ross deserves to be vilified, not regulators. Anyone that thinks it is the fault of a regulator that there are crooks in this world needs to seriously think about what is the true cause of regulation. If no one had ever ripped their clients off, we wouldn't all be forced to undertake the compliance protocols put in place. Aim your frustration at Ross et. al., not the FMA / SFO.

On 14 June 2013 at 8:33 am Fred said:

HHmmm, RAM overstated value by $380 million, huh? About the same as Strategic Finance - & that doesn't seem to bother the FMA much.
"Some 10,000 Strategic investors owed $367.8 million when the lender failed got a Christmas Eve distribution of 1.5 cents in the dollar, taking their return-to-date to 10 cents, and PwC's Fisk estimates they will get between 12 percent and 20 percent of their principal back.

The FMA’s predecessor, the Securities Commission, began investigating Strategic Finance in 2009"

On 14 June 2013 at 12:17 pm M said:

Classic it is a 700m walk from the FMA to Ross's office.
Good to see they are sharp and doing a great job - Or was the walk just a bit far.

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