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Predicting a Royal Commission

May 07, 2018

Famous AFR columnist Pierpont began a September 1997 article by writing “Its becoming pretty obvious that the best way to swindle investors in the future is through unit trusts”. The article describes the way in which Pierpont’s fictitious management company – Blue Sky Funds Management – could be run under new, liberal wealth management laws that were coming into effect in 1998.

Blue Sky proposed assembling an independent board and to “recruit them from park benches for a flagon of sherry, provided they sign blank minute forms for a year in advance”. The auditors would “come every six months to see whether the assets are still there” although “if Pierpont can steal them fast enough they won’t be and neither will Pierpont”. And furthermore, “the only other problem will be coping with the AS[I]C, a prospect which does not quite terrify Pierpont.”

After twenty years, Pierpont’s satire is reality. Blue Sky would have been gobbled up in the “great vertical integration” within the banking sector many years ago. For so long as real, independent oversight is not part of Australia’s wealth industry, who can be trusted?

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