Bitter harvest - failed investments in agribusiness - Senate Committee Report

A long awaited report on ‘agribusiness’ managed investments schemes (MIS) - Bitter Harvest - has been released by the Senate Economics References Committee.  It examines the failures of a number of schemes – Willmott Forests, Timbercorp, Great Southern - with a particular perspective on retailer investors, many of whom lost substantive moneys in these investments. ARITA made a submission to the inquiry.

The Report makes a number of recommendations about the tax incentives of MIS, financial advisers’ roles in selling the schemes, financial literacy, and means of preventing such collapses and losses in the future. It recommends the CAMAC Reports of 2012 and 2014 into managed investment schemes be reactivated for discussion and implementation.

The Report also makes reference to a recent text, Insolvent Investments, which covers the full range of issues in insolvent MIS, and which was recently reviewed in the ARITA journal: (2015) 27(4) A Insol J 64.

Beyond the legal analysis in the CAMAC reports, the Senate makes little reference to insolvency reform itself.  But it does express concern at financial advisers, who may have inappropriately recommended schemes to their customers, then going bankrupt to avoid the large monetary claims being made against them:

8.37 Investors were particularly galled where their adviser, whom they considered had abused their position for personal gain, was found guilty of misconduct but promptly declared bankruptcy. The adviser, however, continued to maintain a life of apparent luxury and, furthermore, to practice in the financial services industry.

In that context, the Report refers to the current Senate Committee inquiry into penalties for white collar crime, suggesting that the avoidance of penalties through bankruptcy may need review. Recommendations were made on that issue in ALRC 95, Principled Regulation, in 2002.

In its response to the 2014 FSI Report, the government said it was awaiting this Senate Committee report before considering MIS reforms and the CAMAC recommendations.

A government response is now awaited, whether it be to act in relation to MIS, or to introduce some broader collective investments regime within which MIS would be regulated.

ARITA is monitoring the outcome of this Report. Any member comment is welcome.