Advisers in the gun over Ross investments
The fallout from the failure of Ross Asset Management (RAM) looks set to extend to financial advisers who recommended their clients invest in the firm.
Thursday, December 6th 2012, 6:31AM 
11 Comments
The Financial Markets Authority has confirmed it is investigating an unspecified number of advisers in relation to the company, which was run by Authorised Financial Adviser David Ross.
“FMA is aware that a small number of clients invested with Ross Asset Management on the basis of a recommendation by another financial adviser,” an FMA spokesman said.
“We are actively engaging with those advisers and will take appropriate action where, after investigation, any breaches are discovered.”
Investor spokesman Bruce Tichbon said he had been contacted by investors who said they were recommended to David Ross by “high-profile financial advisers around the country”.
Tichbon declined to name any of the advisers but said he’d heard “large names to small names” in conversations with investors.
“The people who’ve been particularly motivated to ring me have been those that were recommended by a financial adviser or those who put a large amount of money in at the end.”
Corporate lawyer and fund manager Brian Henry, who represented Carey Church in the Armitage v Church case, said the situation was “looking very ugly” for financial advisers.
He predicted lawsuits similar to those that followed the finance company collapse, but he said advisers who recommended Ross would have an even harder time defending themselves.
“The obligation of the investment adviser is quite clear in case law: they must become familiar with and understand the investment they are advising on. They look at published accounts, audited reports, trustee action, reaction or non-action, the prospectus and investment statement.
“These are the base documents when they start looking; they still have to use their brains, smarts and common sense on top of this statutory base. With this guy they have no statutory base to start from.”
And Henry said affected advisers might not even be covered by their professional indemnity policies.
“They will not cover those advisers if the loss has been caused by diminution of value of the asset and not by negligence. If they can say the asset was absolutely stolen and was total theft they might be able to get a pay-out.”
| « Ross exempt from ‘most demanding’ AFA standard | Fund managers call for level playing field » |
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Comments from our readers
Similarly Henry may be incorrect in the statement regarding theft. The diminution of value exclusion may still be applied by the insurer, regardless of the reason for the diminution.
Also, what if these "referrals" were pre regulation?
So many questions and too little information.
Again, not a happy situation for our industry. We are once again, all tarnished and no amount of playing the "my operation is safer for the client, than yours" game, is going to help anyone except giving some a short burst of "egoism" on this site.
The reality is that this disaster hurts the entire wider industry. It's not only financial advisers who don't have an independent custodian. It hurts ALL financial advisers and all fund managers. Every participant needs to critically look at their risk management and investor protections. Confidence has been eroded (again).
The sooner that the industry rids itself of these folks (you know the ones - who reckon that they're above any research or appraisals before placing investments) the sooner the industry can regain the confidence of the investors. Until then (as pointed out by John), we're all tarred with the same brush
Off to the proctologist for you Stan!
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