Adverse economics scupper illegal MISs
Economic conditions and lower investment returns have had more impact in reducing the number of illegal managed investment schemes in Australia than have the actions of the regulators.
That appears to be the bottom line of answers by the Australian Securities and Investments Commission (ASIC) to questions on notice from a Parliamentary Joint Committee.
ASIC had been asked to explain why the number of illegal schemes against which action had been taken had been reduced from 39 in one reporting period to zero, with ASIC commissioner, Greg Tanzer, suggesting that it more to do with the business cycle than other elements.
Another ASIC senior executive, Warren Day, acknowledged to the Parliamentary Committee that the number of illegal schemes had been dropping significantly for around three years and particularly since the global financial crisis.
"We think that is a business cycle thing, where we are coming into a much lower return environment, and we think that has driven a number of these schemes out of existence," he said.
Data provided to the committee by ASIC on illegal managed investment schemes showed that the problem peaked in 2006/07 when 479 instances of litigation were completed.
The ASIC data also showed that there had been 386 instances of litigation relating to illegal managed investment schemes in the previous financial year.
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