by Alan Thornhill
As any experienced reporter will tell you, Friday is almost always lousy day to make a big announcement.
That is especially so if your announcement happens to coincide with major events, such as the opening of an Olympic Games and Russia’s invasion of Georgia.
These tie up what little spare space is left, in the heavily pre-planned weekend papers.
Yet the warnings that Australia’s investment watchdog gave last Friday should not be overlooked.
So we will repeat the main points here.
Belinda Gibson, a commissioner of the Australian Securities and Investments Commission told the Investment and Financial Services Association’s Annual Conference, that it would be watching five areas, very closely, while the present turmoil on financial markets persists.
â€¢ Managed Investment Schemes (MIS) and the disclosure of risk
â€¢ Credit Ratings Agencies (CRA)
â€¢ Listed investment vehicles
â€¢ Audit and accounting issues surrounding present valuation methodologies and disclosure for complicated financial assets and
â€¢ Market surveillance for illegal trading activities.
ASIC recently issued a draft regulatory guide for mortgage and property funds.
That followed its detailed work on unlisted and unrated debenture products.
“It is perhaps self evident to say that where a MIS is in financial difficulties, we will want to focus management on liquidity, redemption practices and valuations,”Â Ms Gibson said.
She also said that ASIC is working with Treasury on a review of how credit rating agencies operate.
Ms Gibson said that is part of Australia’s response to the Financial Stability Forum recommendations.
“It recently held roundtables with the CRAs, industry groups, research houses and consumer groups,” she said.
Ms Gibson said the review was considering the extent to which investors rely on the ratings agencies.
It would also investigate whether the level of diligence and discussion undertaken by agencies warrants this reliance.
Possible conflicts of interest would also be watched.
“ASIC will also focus on major transactions involving listed investment vehicles that are trading at a significant discount to their announced asset values,” Ms Gibson said.
“These transactions aim to increase share price or provide an alternative exit mechanism for holders.
“These transactions can take the form of privatisation, substantial buy-backs, buy-outs of activist shareholders, asset sales and wind-ups.
“ASIC will also look at adequacy and timeliness of disclosure,” Ms Gibson said.
“Directors should be frank about alternatives to the proposed transaction, and the possible benefits of the transaction to the person proposing it,” she added.
You have been warned.
by Alan Thornhill
Major Australian banks have been issuing so-called Samurai bonds in the Japanese market to protect themselves against the disruption caused by the global credit crisis.
An Assistant Governor of the Reserve Bank, Guy Debelle, confirmed this today, in a speech he gave to the Credit Summit in Sydney.
Mr Debelle, who has special responsibility for financial markets, said that the financial sector had driven much of the growth that had occurred, over the past year, in the stock of non government bonds.
“Banks have been tapping new sources of funds and diversifying their issuance across different markets,” Debelle said.
“A significant share of bond issuance in the March quarter was in the form of extendible bonds in the US through private placements.
“Each of the major banks has also recently tapped the Japanese market by issuing so-called â€˜Samuraiâ€™ bonds for the first time.
“This enabled the banks to issue bonds at longer tenors (typically five years) than those issued in the US in early 2008,” Debelle said.
He said the stock of non government bonds had “increased markedly” over the past year.
“Australian banksâ€™ bond issuance has been very strong, particularly in the first half of 2008,” Debelle said.
He said this had totalled $67 billion, in that time.
That was well above the average $32 billion raised in the same part of the previous financial year.
“The strong bond issuance reflects the re-intermediation that has taken place during the credit market turmoil, with banks undertaking a larger share of financing for the non-government sector,” Debelle said.
“In part, the issuance by the banks has also been precautionary in case the dislocation in credit markets was to worsen,” he added.
“The major banks are generally ahead on their funding plans.
“The issuance has been more than enough to meet the banksâ€™ asset growth and maturation of existing issues,” Debelle said.
Over two-thirds of the banksâ€™ bond issuance has been offshore and denominated in foreign currencies, particularly US dollars and euros.
“The choice of funding location primarily reflects cost considerations and the ability to tap long-standing buyer relationships.
“Earlier in the year, there were concerns that investors would have difficulty â€˜digestingâ€™ further offshore issuance, but this has not been borne out.
“Investor demand for bank paper (onshore and offshore) has been strong, with most recent issues oversubscribed, Debelle said.
more at www.rba.gov.au
by Alan Thornhill
For about $1.60 a day, a typical 35 year old non smoking, healthy, white collar worker can buy $800,000 to $1 million worth of life insurance.
And that may well be worth doing, in a typical family, with, say, a $340,000 mortgage.
Men whoÂ die unexpectedly, can leave their wives and children with big debts, that they have no hope of paying.
But how do you protect them against that risk?
Thousands of Australians do that by seeking the help of a financial planner.
Those planners like to compare themselves with fitness trainers.Â They often remind their clients that building wealth, too, requires discipline.
Right now, the Federal government is reviewing the costs and structure of Australia’s superannuation industry.
And the nation’s financial planners are, understandably, apprehensive.
Richard Gilbert, the chief executive officer of the Investment and Financial Services Association, is urging caution.
He says sthe government should not do anything that would stop good people becoming financial advisers.
The industry does get a bad press, at times.
A Four Corners report, on a financial adviser, who persuaded his clients to invest in Firepower, is just the latest example.
The Association, though, insists that the reality is very different, in the vast majority of cases.
With share prices down, some levels of customer dis-satisfaction might well be expected.
But Mr Gilbert says early results from a survey, conducted by the independent research firm TNS, suggests otherwise.
“Despite the market, 98 per cent of those currently seeing an adviser say they are satisfied or extremely satisfied with the expericence,” he says.
This compares with 94 per cent in 2006.
And Mr Gilbert said commissions are still a popular way of paying for financial advice.
The industry hopes the government’s review won’t produce artificial caps on fees.
The Blair government tried that, in Britain, but was forced to alter its decision, after rich clients exploited the system.
And it was forced toÂ raise the fees advisers could charge on new low cost savings products from 1 per cent to 1.5 percent after pressure from insurers and money managers.
The average fee in Australia, on comparable products, is about 1.6 per cent.
nt, after pressure from insurers and money managers.
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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