According to the report from the Senate Economics References Committee, two of Australia's largest agribusiness managed investment schemes failed in 2009 — Timbercorp and Great Southern. These were followed by other major scheme collapses, including Willmott Forests Ltd and Gunns Plantation Ltd.
The collapses resulted in many retail investors losing their money as well as being left with the loans they took out to fund the investments. The report states that financial advisers who recommended the schemes to their clients form part of the several causes which led to the "financial failure".
"The committee has established that there were horrifying deficiencies in the way some advisers adhered to the basic requirements to know their client, the product they were recommending and to have a reasonable basis for their advice," the report states.
"Evidence indicates that, in some cases, advisers disregarded their clients' risk profiles; withheld important information, particularly about the speculative nature of the venture; failed to provide critical documents; wilfully downplayed risks; and exaggerated the promised returns.
"Some financial advisers or accountants put their own interests above those of their clients and gave unsound advice, which resulted in their clients sustaining substantial financial losses. In case after case presented to the committee, it was clear that some advisers were more intent on selling a product because of the attractive commissions they could earn rather than providing their clients with appropriate advice."
Further, the report includes the FPA's views that that the advice mentioned by submitters to the inquiry had ignored the fundamentals of good advice.
"Those financial planners or accountants who recommended that their clients invest a majority or 100 per cent of their assets into a forestry management investment scheme, particularly using leverage, would not be considered appropriate," the FPA said.
The committee also made recommendations as a result of its findings, such as having ASIC be "vigilant" in monitoring the operation of the FOFA legislation and to advise government on potential weaknesses that would allow any form of incentive payments to creep back into the financial advice sector.
In addition, the committee recommends that the Australian government consult with the industry on ways to "improve the presentation of a product's risks in its respective PDS".
"The intention would be to strengthen the requirements governing the contents and presentation of information, particularly on risks associated with the product," the report states.
"This measure should not result in adding to the material in these documents. Indeed, it should work to further streamline the contents but at the same time focus on information that an investor requires to make an informed decision with particular attention given to risk."
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