Newsletter July 2009
July 1, 2009
Fraud – Could It Happen To You?
I was dismayed to read the story of Warren Pickett, the Waipawa financial adviser who lost millions of dollars of his clients’ money in failed investments. I’m not sure what turns a well-respected member of the community into a person driven by greed and deception, however there are steps investors can take to ensure they are not caught in the fallout. The biggest mistake Pickett’s clients made was to invest money in the adviser, rather than in assets in their own name. Clients would forward funds to Pickett’s “Waipawa Holdings” without knowing what that money was invested in. Pickett told investigators that if anyone asked what their funds were used for “I would be quite vague and just say that it was in a wide range of investments, primarily with people that I’ve come across in my business career that I believed would be in a position to repay the funds.” Two victims lost more than $5million each.
Any investment made through Bramwell Brown Limited is registered in the client’s own name. Shares, debentures, fixed interest, KiwiSaver accounts and Kiwi Bonds are all held by the individual investor. Any security you buy should be traceable by it having a certificate issued, appearing on a registry statement, or a simple letter acknowledging your holding. In some cases overseas shares “might” be held by a nominee rather than in your own name in order to reduce the costs associated with buying them.
Some clients pay Bramwell Brown for the securities they have bought. We bank those funds to a Trust Account, and forward them immediately to the company providing the securities. There is potential for dishonesty in this system, however the client would soon know something was amiss if they didn’t shortly receive a registry statement showing their new holding. I don’t think you can completely eliminate the possibility of dishonesty in your dealings with money, however I think you can minimise the potential by ensuring you own any investments you make in your own name. You need to be able to trust your financial and legal advisers, but don’t give an adviser a large sum of money that disappears into a pool of investments that lack some sort of accountability.
Infratil Warrants
The warrants that are due to expire on July 10 have had some of their terms altered. Instead of paying the full $1.62 investors have been given the option of paying 0.55 cents now, with a further $1.12 by May 21, 2010. You can still pay the full $1.62 now if you wish, and if so you will be entitled to a 3.75 cent dividend in July. Those who choose the 0.55 cent option will not receive the dividend, and will pay a total of $1.67 instead of $1.62. Infratil have offered this instalment method of paying to ensure as many investors as possible are able to take up the new shares. All other things remaining equal you are slightly better off paying the full price up front, however I would prefer to pay the 0.55 cents and see how Infratil perform over the ensuing year. The instalment option gives you the chance to withhold the final payment if you so desire. The important thing is to make sure you do something. Either take the warrants up and pay for the new shares, or sell the warrants to someone else. The warrants cease trading on July 07, and any payments need to be to the registry by July 10. You will have the forms to enable you to take up the new shares, and I can sell the warrants for you if that is what you choose. Give me a call if you want to discuss your situation in detail.
Office
On occasions I am busy with clients when others call into the office. Also, on very rare occasions the office may be closed for short periods. If you are coming to the office please ring and make an appointment. If you are unable to contact me for any reason please don’t hesitate to call me on my cellphone (0274523980), or at home in the evening (3703911).
Website
We are currently in the process of developing a website for Bramwell Brown Ltd. It should be up and running within a week, so please have a look (www.bramwellbrown.co.nz). I would value any feedback you might have, and would appreciate you referring others to the site.
Big Wednesday
Congratulations to Masterton’s Big Wednesday winners. I personally feel $36million is an obscene amount of money to give as a prize, and I sincerely hope they are receiving good advice on how best to handle such a sum. There will be plenty of sharks circling, trying their best to get a slice of the action and my only hope is that the family doesn’t end up giving as much away in fees as they give away to worthy charities. I can’t imagine what our mayor was thinking suggesting they might fund council projects.