by Alan Thornhill
Directors of QBE are likely to face a shareholder class action, after the insurance giant’s sharp profit downgrade late last year.
The legal firm, Maurice Blackburn Lawyers, announced today announcing that it is investigating an action of this kind.
In its statement, the firm said: “shareholders have an opportunity to hold QBE Insurance Group Limited to account over its share price collapse in December last year,”
It said, too, that after calling a trading halt on Friday 6 December 2013, QBE stunned the market on Monday 9 December 2013 when it announced it was expecting to post a loss of $US250 million for FY2013.
The losses arose from QBE’s troubled US business.
Maurice Blackburn said the market responded by wiping $4 billion off the market value of QBE in a day.
Its stock had plummeted by 22.3 per cent the day the announcement was made, closing $3.45 down at $12 – the biggest single day fall for QBE in the past 12 years.
“The stock continued to fall the following day, shedding another $1.18. In total, QBE shares fell 30 per cent over two days,” Maurice Blackburn said.
When confirmed in February this year, the reported loss of $254 million was the first loss for the company since 2001, coming on the back of analysts’ expectations of a $1billion-plus profit.
Class Actions Principal at Maurice Blackburn, Jacob Varghese, says the firm is investigating whether QBE breached its continuous disclosure obligations for not informing the market of the losses sooner.
“We have been approached by shareholders concerned that QBE was less than frank and timely in informing the market of the troubles in its North American business, which were at the heart of last year’s surprise loss,” Mr Varghese said.
Shareholder class actions are an essential part of Australia’s corporate governance landscape. They are an important mechanism for investors to make themselves heard in the boardroom.
“Full and honest disclosure is a small price to pay for access to the superannuation and life savings of Australians.
The firm said those interested in joining the action – at no cost – should go to www.mauriceblackburn.com.au/QBE
by Alan Thornhill
The Reserve Bank board has left interest rates on hold – at 2.5 per cent – even though Australia’s economic growth has been “below trend.”
However the Bank’s Governor, Glenn Stevens, said: “recent information suggests slightly firmer consumer demand over the summer and foreshadows a solid expansion in housing construction.
And he added: “some indicators of business conditions and confidence have improved from a year ago and exports are rising.
“But at the same time,” Mr Stevens warned, “resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans.
“Public spending is scheduled to be subdued,” he added.
Mr Stevens also said: “the demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher.
“It will probably rise a little further in the near term.”
And he added: “growth in wages has declined noticeably.
“ If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.”
Mr Stevens said: “Monetary policy remains accomodative.
“ Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments.
“Credit growth is slowly picking up.
“Dwelling prices have increased significantly over the past year.
“The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months.”
But he added: “the exchange rate remains high by historical standards.
“Looking ahead, continued accomodative monetary policy should provide support to demand, and help growth to strengthen over time,” Mr Stevens said.
“ Inflation is expected to be consistent with the 2–3 per cent target over the next two years,” he added.
Mr Stevens said, in these circumstances, the board believed it was “prudent” to keep interest rates on hold.
by Alan Thornhill
Older Australians have become a dominant force in Australia’s increasingly sophisticated consumer financial services market.
This is reflected in a report published today by the Roy Morgan organisation.
The report also contains sobering messages for the big four Australian banks and financial advisers.
It notes, for example, that although the big four still dominate the market – and their customer satisfaction rates are up – their customer loyalty is low.
The report also notes that only 25 per cent of Australians rate their financial planners favourably in terms of their ‘ethics and honesty.’
This finding is particularly relevant now, as the Federal government has legislation before Parliament, which would ease the present requirement for advisers to act “in their clients’ best interests” when their advice can be seen as “general.”
The report reflects the dramatic changes tin Australia’s consumer financial services industry since the 1997 Financial System Inquiry.
A new Financial System Inquiry is already underway.
So the latest report will provides an invaluable update on the current situation, how it is operating now and how it might be improved.
The report found that older Australians are big users of present financial services.
Although over-50s make up just 39.5 per cent of the population aged at least 14, they account for 55.9 per cent of the consumer financial services market.
It noted, too, that growth in the consumer financial services market, over recent years, had been spectacular.
“Since 1997, the Australian consumer financial services market has grown at ten times’ the rate of the population,” it said.
The report also found that:-
• Superannuation and lending have been the principal drivers of growth, with super now the major financial category, equivalent to just under half the total market value of financial services. Lending grew by 324 per cent.
• The top 20 per cent of customers based on financial value control 64.8 per cent of the value, while the bottom 40 per cent account for just 2 per cent.
• Since 1997, the rise of technology has been stratospheric, and has impacted heavily on channel selection. Internet banking has surpassed branch usage, and mobile banking is the latest growth channel – especially among younger age groups.
• ‘Big 4’ banks have increased their market strength, despite the 1997 inquiry predicting that new entrants and shifting market dynamics would result in more competitive conditions.
• The ‘Big 4’ banks have increased their customers’ overall ‘share of wallet’ but customer loyalty remains low.
• Customers’ satisfaction in their banks has skyrocketed, representing one of the market’s biggest changes since 1997, and switching intentions are down. But businesses are less satisfied with their banking relationships.
by Alan Thornhill
The Federal government has chosen trial sites in Western Australia for the proposed National Disability Insurance Scheme.
The Prime Minister, Tony Abbott, made the announcement in Perth today, just days ahead of the Senate election that is to be held in WA next Saturday.
Mr Abbott issued a joint statement – explaining the plan – with his Assistant Minister for Social Services, Mitch Fifield,
“They said: “A trial site for the NDIS will be established in the Perth Hills area, alongside a trial site for Western Australia’s My Way scheme in the Lower South West region and Cockburn/Kwinana regions.”
They declared: “These trial sites are crucial to the National Disability Insurance Agency’s ability to ensure the scheme is built on strong foundations and key lessons from the trials are taken on board.”
The statement said about 8,400 disabled West Australians would benefit from the two trials.
“Even more will benefit from the full rollout of the NDIS,” Mr Abbott and Mr Fifield added.
“The trial sites in Perth are key milestones in the continued national rollout of the NDIS,” they said.
by Alan Thornhill
The ANZ Bank will waive fine print qualifications” on an offer it made, after the corporate watchdog investigated complaints that the bank had misled consumers.
The complaints related to advertising that promoted an ANZ Visa gift card when clients applied for income protection insurance.
In a statement today, the Australian Securities and Investments Commission said the advertisements for income protection insurance with a bonus offer of a $100 ANZ Visa gift card ran in newspapers and online between 3 November 2013 and 14 December 2013.
“However, under the terms of the offer consumers did not qualify for the gift card unless they maintained their policy for an initial year and paid all premiums when due,” ASIC said.
“While these conditions were disclosed in the advertisement’s fine print, ASIC believed they were not sufficiently prominent to ensure that consumers would not be misled,” it added.
by Alan Thornhill
The Federal government is putting its controversial financial advice plan on hold.
The plan, confirmed last week, received a hostile reception, including cartoons suggesting that the proposed changes “protect the sharks.”
Under those proposals, the requirement for advisers to act in the best interest of their clients would have been lifted in many cases.
This was particularly so when bank staff – and others – gave only “general advice.”
However in a statement today, the Minister for Finance and Acting Assistant Treasurer, Matthais Cormann, said the government would now be allowing extra time for consultations.
He said the changes proposed, in the government’s Future of Financial Advice bill, had been referred to the Senate Economics Committee.
Senator Cormann said this would enable the Government to consult in good faith with all relevant stakeholders on the Future of Financial Advice Regulations.
He said, though, that the Government remains committed to implementing the improvements to Future of Financial Advice laws that we took to the last election as soon as possible.
Even so, this is a big switch in the government’s plans.
by Alan Thornhill
Tony Abbott declared that he was presenting “the biggest bonfire of red tape in our history” as his government moved in Parliament today to scrap thousands of regulations.
However the Opposition dismissed the initiative as “a stunt” and charities protested over the government’s plan to axe a charities watchdog, as part of its attack on perceived over-regulation.
The Opposition Leader, Bill Shorten joined that protest, saying Australians want to know where their money is going.
The Prime Minister told Parliament that 9,500 unnecessary and counterproductive regulations and 1,000 redundant acts of Parliament would be repealed.
“Removing just these will save individuals and organisations more than $700 million a year, every year,” Mr Abbott said.
But Mr Shorten was not impressed.
“This is dodgy law, done in a dodgy way which will lead to dodgy outcomes,” he said.
Meanwhile several major charities, including the Australian Council of Social Service, have protested in an open letter to Mr Abbott, over his government’s plan to abolish the Australian Charities and Not for Profits Commission, as part of its attack on red tape.
They described this move, in their letter, as “a big mistake.”
by Alan Thornhill
Thinking of setting up a self managed superannuation fund?
And need a little help?
But make sure you read all the documents and ask the right questions before you proceed.
One widely advertised service, offering help in this area, has just been penalised over “potentially misleading” statements that it made.
You probably won’t be too surprised that the service provider, SuperHelp Australia Pty Ltd, offered “free help” that wasn’t.
The Australian Securities and Investments Commission, which imposed a $10,200 penalty on the company, over its behaviour, has just issued a statement explaining the case.
The corporate watchdog said its concerns arose from an advertisment SuperHelp published in the October 2013 edition of the Australian Financial Review’s Smart Investor magazine.
“The representations were that fund set up was free and that pension fund set up was free, subject to ‘conditions’.
“No conditions were disclosed in the advertisement,” ASIC said.
But clients were required to pay $475 upfront.
That was – half the annual administration fee – to be eligible for ‘free’ fund setup.
“There were also restrictions on the number of members a fund could have and how many investments could be made,” the Commission added.
ASIC said it was also concerned that pension fund setup was not free under any circumstance for investors under 60 years of age.
The Commission’s Deputy Chairman, Peter Kell said, ‘It is crucial that investors are not misled when it comes to the cost of establishing an SMSF.
‘Setting up an SMSF is an extremely important financial decision and consumers have a right to expect that representations made about setup costs reflect the actual costs they will incur’, Mr Kell said.
‘ASIC has a particular focus on misleading claims that a financial product or service is “free”, as this may lead consumers to make inappropriate financial decisions’, Mr Kell said.
However the Commission noted that SuperHelp took steps to correct its advertising in the March edition of the Smart Investor magazine and that it is developing improved processes for the sign-off of advertisements.
Mr Kell said the payment of an infringement notice is not an admission of a contravention of the consumer protection provisions of the Australian Securities and Investment Investment Commission Act 2001
But he said the Commission can issue an infringement notice where it has reasonable grounds to believe a person has contravened certain consumer protection laws.
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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