Law of Investment and Financial Markets - WestPoint - Case Study Example

Introduction WestPoint was a property elaborator of projects which were inclusive of village areas, medicinal centricities, shoppinghubs etc. in countries like Sydney, Perth, Melbourne and Brisbane (Burell 2006, page 86). There are 6 firms of receivers and annihilators which are implicated by the WestPoint group. The Australian Securities and Investment Commission (ASIC) have initiated a disquisition regarding WestPoint breakdown and this analysis includes 50 entities and particulars (Burell, 2006, Page 88). Various banks were amenable for the financing of WestPoint projects which were further topped with Mezzanine finance. According to the appendix 'Four Corners', the WestPoint case involved 4000 Australians, most of which were pensioners (Four Corners, 2006, Page 1). Small investors were the ones to face the tragic collapse of WestPoint, as they lost their savings and the impact of these investors is described by the procession of WestPoint Investors Group to organize demonstrations to emphasize their predicament and attract the investment casualties. Complexity in financial funding Some years before, WestPoint aggrandized funds by ensconcing a network of financial planners in order to upgrade its products. The entities interested in investment ought to hold an Australian Financial Service License for initiating with the investment operation, the venture or entity that counsels about financial products ought to be an Australian Financial Service holder (AFS); called as an AFS licensee. Financial business usually are deposit accounts, insurances, investments in funds such as shares, debentures etc. If not an AFS bearer, he can either be a director or apprentice to the license bearer. Furthermore, if the former doesn't intervene, he should be an authorized delegate of the Australian Finance service bearer. These delegates or representatives can be termed as 'business authorized representatives' as they hold an approbation to represent license bearers. There are assorted legal protections provided by the Australian Finance Services license, if at all, something inappropriate or contradictory situation occurs. It is always advisable to keep in account the license details of any financial services or benefits one is planning to avail. Since, West Australia is a renowned hub for business successes and entrepreneurship, the promoters and planners allied to financial sectors, accountants and others took availed all the possible opportunities of risk tolerations to gain profits. This was all possible because of a property development called WestPoint. But, some of the financial arrangements which were careful in planning involved the profits outside the governance of the Australian Securities and Investment Commission (ASIC), which was its governor. It focuses on the promulgation of Markets Advisory Committee to operate the corporate establishments. Also, it focuses on establishment of Takeovers Section, an Australian accounting Board, a financial Reporting Panel involved in financial services. This act is conformed on jurisdiction and in states which are referring only to the reach to which the legislative powers of the Parliament takes charge of the application. Australian Securities and Investment Commission is a common seal with enduring succession, along with the procurement or disposal of real or personal asset. As far as membership is concerned, ASIS comprises of 8 members out of which 3 ought to be full-time associates appointed by the Governor-General. The solutions to it, definitely, seek a change in the laws to discipline all such financial arrangements within the frame and the regulatory concepts of the Management Investment Act. Managed investment schemes, basically, refer to the mutual investments by people who are collated to take interest in a particular scheme by augmenting money which is utilized in a common concern. These schemes mainly target a comprehensive variety of investments which include cash management trusts, equity or share trusts, agricultural schemes such as horticulture; economic breeding, equity trusts, mortgage schemes etc. In order to register for a managed investment scheme so that it may perform, the individual ought to be a registered firm or company and shall withhold the AFS (Australian financial services) license to operate or perform. Undoubtedly, confidence over investment and efficaciousness in funding are two integral amplitudes in order to expand the savings assiduity. But as far as WestPoint group is concerned, its impact on the estimated investors, which were around 4000 to 6000 in number, is a matter of great apprehension. Business reviews comment that more than half of the investors in WestPoint emerged to relate with self-managerial funding. WestPoint has assured and guaranteed the investors with attractive returns, mostly high, and with minimum risk and chances. The investors, on the other side, were not aware of their investing strategies which were largely on the basis of an unregulated world of notations. This catastrophe of WestPoint group implied that the problems not only prevailed within the regulatory discernment and promotions full of risks, but also with the laws that supported it. WestPoint and the Corporations Act The Corporations Act makes provisions to corporations and financial products and services. However, there is a crystal clear gap between the Corporations Act and the promissory notes of WestPoint Group. . This operational act is chiefly underpinned on the constitutional powers of the Commonwealth Parliament. As paraphrased under section 51I of the Constitution, in order to function in referring states, this act operates on the underpinning of the legislative powers of the Common wealth Parliament and the powers it has in accordance with this act of the referring States. For the functioning of this act outside Australia, the act is justified in accordance with the legislative powers of the Common wealth Parliament under section 122 of the constitution for the government's regulations and laws persisting in those territories. The Australian Securities and Investment Commission were unable to serve an action in order to ascertain the promissory notes regarding because the matter was yet to gain attentiveness. The governance of Supreme Court in Australia was yet awaited to adjudge the promissory notes issued by the WestPoint Company. According to Denise Brailey, the President of the Real Estate Consumer Association Inc, a WestPoint information protocol to the Australia Securities and Investment Commission (ASIC) in the year 2001 concerning the approval and promotion of the promissory notes as capitally secured as WestPoint claimed its guarantees by way of a second ranking obligation. However, ASIC failed to take an action regarding its promotion and this, furthermore, led the set up of 11 projects by WestPoint group over the next four years, as quoted by Brailey (FICS, 2006). This implies that WestPoint was ridden with desperation for funds and profits, and therefore, claimed and propositioned high returns and commissions in investment. The WestPoint group promised their investors a surety of an interest of twelve per cent and a commission up to eight percent of the rise in funds to the financial administrators. Compared to WestPoint income fund, there was yet another a management investment scheme which offered its investors a significant fixed return rate of nine per cent for one year, which is fixed, ranging to ten per cent per year for a three-year term. The Australian Securities and Investment Commission (ASIC), which introduced the investigation to bring an end to certain entities in the WestPoint Company, the government should consider it to be at both the legislative and regulatory level. According to the WestPoint Group, there is a job yet to be accomplished regarding the regulatory regime that Australia promotes the investors efficiency along with making sure that the retail investors are fully aware of such businesses. To successfully form an investment decision, both the advisors and investors rely on the unfolding of the information regarding the adequacy. This information is the sole responsibility of the entities and people who are involved in offering the opportunities to invest. FICS Special Board Report One of the chief board meetings regarding the WestPoint Group collapse ruled in the need and requirement for Financial Industry Complaint Service (FICS), in order to prosecute the increased monetary limits. Also, implementation of recent change in rules and independent reviews over systemic issues were brought into account. Firstly, the jurisdiction had faced some significant objections as the management had interacted with the professional reimbursement insurer related to FICS authority for which, later on, FICS agreed to present it to the insurer staff. Secondly, regarding the transformation of rules, the Board Rules Committee recommended certain rules for the stake holders and they were approved by consultation with the External Rules community. Thirdly, the Board accepted a chief executive report which comprised of a comprehensive summary of the analysis in statistics of the work and performance of the industry sectors and the operative areas within the assistance. This report, mainly, concentrated on the WestPoint complaints and also the problems generated by the acquirement of the Financial Industry Complaint Service for taking over businesses and organizations without acquiring the liabilities and therefore, leaving the customers without the armament through FICS. The Australian Securities and Investment Commission have been vigilant on this context. Thirdly, a corporate Plan was introduced by the Board so that the management seeks attention to it. This plan considers the developments and the individual contribution in the form of inputs of the respective imperatives within the management. Lastly, the National Panel informed the board regarding the work to be conducted and the approach to adopt in order to follow the application and adoption of the documentaries to be issued which include the surety of the responsibility of the expedience of matters. Conclusion WestPoint and its schemes doomed due to several reasons. Amid a major investigation and actions by the Australian Securities and Investment Commission, the property schemes resulted in a collapse. This regulation act has restricted the management and promotion of the finance conspiracies that indulged in capitalizing WestPoint's national development activities. Most of the investors sank their money into these mezzanine schemes and got negligible returns or no returns on their investments. Since, WestPoint faced long delays in some seaboard projects, some investors were moved to a finance scheme company called Emu Brewery Mezzanine (EBM), which have the court orders to allow the distribution of more than $10 million to investors despite the claims on the cash from liquidators of Emu Brewery Developments Pty Ltd. (EBD). References Prior, Neale. (2008). Rivals face off over $10m in Carey kitty. WA Business and Mining. 26th April 2008. FICS. (2006). Special Board Report. [Online], 14 September 2009. Available: http://www.fics.asn.au/FICS%20Board%20Reports/Archives/Special_Board_Report_August2006.pdf. John Wiley & Sons Australia, Ltd. Current affairs noticeboard. [Online], 14 September 2009. Available: http://www.johnwiley.com.au/highered/auditing2e/lecturer-res/current-affairs/2006-06/2006-06-04.pdf. Westpoint Collapse. (2006). [Online], 14 September 2009. Available: http://senatorwatson.com.au/secure - senatorwatson.com.au. Read More