Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Monday, 21 May 2007
Page: 139


Mr Murphy asked the Treasurer, in writing, on 30 May 2006:

(1)   Is he aware of reports that Denise Brailey, president of the Real Estate Consumer Association Inc, raised concerns with ASIC about Westpoint’s use of promissory notes as early as 2001.

(2)   Did ASIC receive complaints in August and December 2003 about Westpoint’s investment seminar activities; if so, what are the details of the complaints.

(3)   Were any other complaints lodged with ASIC or the ACCC prior to June 2004 regarding Westpoint’s activities, the conduct of Westpoint directors, or the conduct of financial planners in receipt of commissions from the Westpoint group; if so, what are the details of the complaints.

(4)   Was action taken by ASIC or the ACCC on each of the occasions prior to June 2004 on which concerns were raised about the activities and conduct of the Westpoint group, or those affiliated with the Westpoint group; if so, what action was taken; if not, why not.

(5)   Will the Government fund a legal class action to help investors recover losses from Westpoint, Westpoint group directors, financial planners in receipt of Westpoint commissions or their insurance companies; if not, why not.


Mr Costello (Treasurer) —The answer to the honourable member’s question is as follows:

(1)   ASIC has advised that prior to its May 2004 media release announcing action on mezzanine finance, 12 reports were received from the public concerning various entities in the Westpoint group, including a telephone call from Ms Brailey. However ASIC has no record of receiving a formal written complaint or other evidence from Ms Brailey to support her verbal complaint.

(2)   No. ASIC has advised it received 7 complaints between August and December 2003 raising various concerns about mezzanine financing as a ‘type’ of fundraising and the issue of whether it is (or should be) a regulated product subject to Corporations Act licensing and disclosure requirements. None of the complaints during that period raised concerns about investment redemption, solvency or seminar activity.

(3)   and (4) The ACCC has advised that, prior to June 2004, it received 19 consumer complaints and inquiries regarding Westpoint’s activities. As the complaints and inquiries were not within ACCC’s jurisdiction, the parties were advised to direct their correspondence or inquiries to ASIC. ASIC has advised that, prior to June 2004, it received:

  • one complaint in 1999 and one in 2000 raising concerns on whether the particular promissory note involved was a regulated product requiring formal disclosure under the Corporations Law;
  • two complaints in 2002 regarding the same issue, and whether the Westpoint product required an ASIC license for its promotion and sale; and
  • seven complaints in 2003 (as noted in Q2 above) and one in early 2004 raising the following issues: whether the promissory note is a regulated product; the problem of non-completion of fit-out for Westpoint project apartments and movement of monies between property developments in order to complete projects; the failed sale of a Westpoint apartment by a complainant; whether a license was required to promote or sell the Westpoint product; failure of one Westpoint entity to hold an AGM and lodge a financial report; and concerns in relation to the offer of refinance by a Westpoint entity.

   These complaints culminated in the Westpoint mezzanine finance action announced by ASIC in May 2004.

   In late 2003 and early 2004, ASIC entered into talks with Westpoint aimed at bringing the group’s fundraising within the protections of the Corporations Act. ASIC was not aware of the apparently large scale involvement of licensed financial planners advising on Westpoint products. Following the failure of these talks, ASIC started legal proceedings in May 2004 to argue that the funds should have been raised in accordance with the Corporations Act disclosure regime.

   In mid-2004, ASIC required many of the companies involved in the Westpoint Group to file independently audited financial statements. These statements reported that the companies were solvent and were signed off by the independent auditors as true and correct, without qualification. In 2004 and early 2005, some investors raised concerns about delayed redemption of investments and income distributions. However, in the course of ASIC making enquiries into these complaints, these investors were paid by the relevant Westpoint entity.

   Subsequent to the publicity surrounding ASIC’s actions in late 2005, ASIC began to receive large numbers of complaints which suggested that advisers may have been providing investors with inappropriate or inadequate advice about Westpoint. ASIC is currently investigating the activities of these advisers, including how Westpoint was included on their approved product lists, and what commissions they earned.

   (5)   Under section 50 of the ASIC Act, ASIC can cause civil proceedings to be commenced and carried on in the name of persons in certain circumstances. In order to exercise this power, ASIC must have already undertaken an investigation or examination (under the ASIC Act) of the breaches. In that regard, ASIC’s Westpoint related investigations have not yet been finalised.

   ASIC is also alert to other ways in which assistance may be provided to investors, including by pursuing regulatory proceedings that may result in a court making findings of fact that may assist any subsequent private actions (such as through section 12GG of the ASIC Act).