Another corporate crash !

Once again a high flying corporate finance group has gone into receivership - leaving behind a litany of ruined retirees. New Zealand based Bridgecorp Property Group has joined Westpoint, Fincorp and Australian Capital Reserve in laying waste to the savings of mostly self funded retirees.
There is a common thread to these disasters. The investment companies are formed to finance high yield construction projects. They seeks investment not by offering a prospectus to financial advisers but by heavy advertising on TV and in the media - such as pensioner magazines - aimed at the retired.
Invariably the offer is of interest well above that offered by the banks and the conservative investment institutions. Bridgecorp attracted four hundred and thirty million dollars by offering interest of 11.9% per annum.
This return is possible - provided the market continues to expand, but at the first hint of trouble the scene is set for disaster. This does not stop the principals from continuing to draw astronomical salaries - and in the majority of cases these same people do not have substantial personal assets associated with the firms they manage.
Which raises a question ! Why does the Australian Securities and Investments Commission ( ASIC ) - which is supposed to monitor the integrity of investment companies - sit on it's hands and allow these disasters to happen with monotonous regularity ?
ASIC has the power to closely monitor the daily activities of such companies and it has the business experience to become aware when one is entering troubled waters. The purpose of ASIC is to guide such a company towards a safer business strategy - and to sound a warning to alert the investing community that all is not well.
Critics contend that if ASIC interferes then such a warning would shut down further investment and cause an immediate corporate collapse. Surely that would be better than allowing an ailing company to continue to heavily advertise - and draw in an even greater number of people to lose their savings ?
Now is the time for the government to have a long, hard look at the operations of ASIC and other corporate regulators with a view to providing greater powers - if these are deemed necessary - to stop investment companies operating way outside the genuine norms of business.
For a start, it would be a good idea to increase the personal responsibility of those who instigate and manage such firms so that a charge of " irresponsible management practice " could result in a substantial custodial sentence. It is a well known maxim of business that " Let the buyer beware ". Perhaps it is time for a new maxim for those managing such institutions. " Be ethical and prudent - or be prepared to lose your freedom ! "