opes demise exposes regulators

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    Opes demise exposes regulators

    We had a bloke on the phone today, a 67-year old client of Opes who had lost his life savings.

    He was contemplating ending it all, he said. He was in tears. It would be too late to make enough money back for him and his family to retire on, let alone live on, now the years were running out.

    He had a share portfolio of $1.8 million and a loan of $332,000. All gone now. He was working on bringing his loan back to zero. ANZ and its receivers Deloittes are too busy to respond to him. He said he didn't know about the transfer of title on his Opes stock to ANZ. Didn't read the small print.

    There was a flurry of desperate and angry email too - as there has been for days - blaming Opes, its principals, ANZ and Merrills, and regulators ASIC and ASX.

    Then there was this one:
    "Serves 'em right. If the bunnies signed the contracts, which stated transfer of ownership, then that's their problem.

    They signed the contract (transfer documents), and they took the ride. What's wrong with these guys?
    With small children as well? I can't believe their stupidity, bombasity and now their grasps for sympathy.''

    The fact that a client of Opes did not read the contract closely enough, or did and ignored the risk does not diminish the personal tragedies playing out in this Opes fiasco.

    Every single human drama of the 1,200 clients may have been avoided but for the actions of the Opes cowboys and a systemic failure. No one's fault in particular, no single person to blame, there rarely is.

    ASIC and ASX have taken some heat - and they deserve it.

    Did ASX who regulates the brokers ever check out Opes Prime? Unlikely.

    What about ASIC, the corporate watchdog? Not until Opes had blown up. Even then, its first ploy was to say it could say no more than it had revoked Opes boss Laurie Emini's passport.

    Sexy ploy, play the man, create the villain.

    Though villain he may be, and that is not established yet, the fact remains that Opes was licenced. And with that licence, it allowed its clients to borrow over anything except the most mangy greyhound at the track. In canine terms we are talking Doomben, not Wentworth Park.

    We are talking hundreds of tin-pot stocks, and even options, many with the faintest hope of ever earning a cent in revenue.

    We have a bunch of leaked client portfolios. Everyone knew anyway.

    Tricom was in the press three years ago, care of this reporter, for margin lending over speculative shares. Chemeq to be precise. That went bust.

    Still, the majority of Opes clients knew the risks, intellectually if not emotionally.

    Then there are the banks.

    ANZ knew intimately what Opes was up to. Some 660 small stocks, most with no earnings. Were the banks reckless?

    And what other regulator might have known, should have known, and could have done something? Any guesses?

    The Australian Prudential Regulatory Authority. Heard of them?

    They try to keep a low profile. APRA regulates the banks.

    Its role is to get involved when it suspects reckless lending practices or risk of a systemic or specific bank failure.

    So what have they been up to while all this margin lending has been crashing down?

    Skulking about in their taxpayer-funded ivory towers hoping no one notices? Who knows, "We can't comment on specific cases''.
    The old PR line was trotted out.

    But you did comment, issuing a slather of press releases on the specific case of the National Australia Bank $360 million forex rogue trader scam ...

    A spokesman kindly directed us to comments made by the APRA boss John Laker at a Senate Estimates committee in February. "It covers the issues''.

    What issues?

    This descended into the usual Pythonesque PR exchange where they try to tell you nothing, hope that you won't write anything and pray that you don't ask to speak to the boss.

    We did. Surely it would reassure the market? Couldn't even come good with a "we are monitoring the situation''.

    Naturally John Laker wasn't available for comment.

    We were directed to the old Estimates speech again - you can probably dig it up on the website - but frankly have been a bit tied up with things like talking a bloke out of committing suicide to take a history lesson in carefully worded old statements made before the latest $1 billion blow up.

    Now to the leaked Opes documents which landed today. They are a bit old but useful.

    Colourful Melbourne identity Leo Khouri had a portfolio value last July of $14 million in one account and another $10.3 million in another. His loans were conservative at less than $1 million and his LVR was fair dinkum stingy by Opes standards at 25%.

    Sydney lawyer Chris Murphy, on the other hand, had LVRs of 95% across his handful of stocks and loans to the tune of $168 million.

    What was Opes thinking with its 95% LVRs? What were the banks thinking lending to Opes? And what were the regulators thinking in their sleep.

    Finally, it should be noted - in light of Opes clients efforts to injunct the ANZ sale process in the courts - that the securities lending contracts at issue here are as yet ''unlitigated'' or untested in courts in this country.

    Although the banks appear to have title over Opes clients, ANZ did not have clear title or otherwise it would have received dividends and issued substantial shareholder notices for beneficial ownership.
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