Solicitors’ mortgages in the spotlight
Solicitors’ mortgage schemes once again feel the heat in response to rising losses from several schemes in Tasmania which have been estimated to have lost up to $20 million.
The Tasmanian State Government has reacted with a senate hearing in Hobart at which the state's shadow attorney-general Ray Groom called for better supervision of solicitors' mortgage schemes.
According to Groom, the schemes that had folded already affected around 300 investors.
Groom told the hearing he was concerned over the lack of information about what was happening to investors' funds.
"It has been put to me that a competent person should be appointed to supervise and co-ordinate the total issue, to protect the interests of investors and ensure that every effort is made to recover funds and keep investors informed," he said.
The investment products were offered by three Hobart solicitors firms. Managers have been appointed by the Tasmanian courts to look after schemes operated by two of the firms with the third scheme remaining afloat and continuing to be managed by the firm.
Problems with solicitors' mortgage schemes have been growing during the past few years, with some spectacular failures in Western Australia.
The growing problems in WA were believed to be behind the collapse of the Court government in the recent state election.
The Senate hearing in Hobart was taking submissions from a number of government and professional bodies.
The senate committee chair Senator John Watson says the hearing was not intended to be a witch-hunt.
"The committee's interest is not to identify specific individuals who may or may not have been involved in improper conduct," he says.
"The committee intends to examine solicitors' mortgage schemes in the context of broader prudential supervision."
Groom told the hearing that changes to legislation and the rules of practice when auditing these schemes need to be considered.
"Also, consideration should be given to the role ASIC has played to date, and any deficiencies in its powers or performance," he said.
The Australian Securities Commission (ASIC's predecessor) had granted the Tasmanian Law Society powers to administer these schemes, Groom said.
The Senate committee plans to question ASIC and APRA about their roles in these schemes at a public hearing to be held on June 12.
The hearing follows on from ASIC's own announcement in February of an investigation into the schemes. Since then, the group has begun court action in March against one scheme, placed interim stop orders on the prospectuses of three other schemes and appointed responsible entity for a further scheme.
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