Upfront & trailing commissions to be banned

definitely major changes to how some rebate companies will be working... (EJ)

Financial advisers' super slice to get axe

PETER MARTIN

April 26, 2010

Financial planners will have to earn their keep openly from their customers as part of sweeping changes that will outlaw kickbacks and commissions and revolutionise superannuation from 2012.

Fiercely resisted by parts of the industry, the changes go further than recommended by the Senate inquiry set up in the wake of the collapse of the Storm financial group, which cost thousands of people their life savings.

That inquiry recommended in November that the government merely ''consult with and support industry'' to find a way of ending payments by superannuation fund managers to financial advisers.

Instead Minister Chris Bowen will legislate to ban the payment of all types of commissions on all investments other than insurance from July 2012.

The legislation will also require financial planners to ''place clients' interests ahead of their own'' - which they are not currently obliged to do.

''The reforms will give Australians advice that is in their best interests, rather than the result of incentives or commissions,'' said Mr Bowen.

Crucially the new law will not only ban the payment of upfront commissions, sometimes worth 1 to 2 per cent of the sum invested, but also the hidden but more significant ''trailing commissions'' worth 0.55 to 0.60 per cent of the funds under management for each year that it stays invested. On a $200,000 investment these can cost $1200 per year, or more than $24,000 over 20 years, whether or not continuing advice is received.

The financial research firm Rainmaker estimates that Australians pay more than $1 billion in ongoing commissions per year.

''This will end the kickbacks and commissions and inertia payments that four million Australians have endured for decades,'' Industry Super Network head David Whiteley said. ''It'll make the commercial funds more like our industry funds.''

The Coalition has indicated it will oppose such reforms. Treasury spokesman Joe Hockey gave the industry a commitment in November that ''the Liberal Party will not support the banning of commissions''.

The changes will apply only prospectively, meaning that Australians in existing superannuation funds will continue to pay ongoing commissions for as long as they remain in those funds, giving the industry time to adjust. However changes to the operation of so-called default funds are likely to outlaw the payment of trailing commissions for 80 per cent of fund members in any case.

To soften the blow of upfront charging by financial advisers, the minister has hinted the government will make such charges tax deductible when it responds to the Henry Review. The concession would cost $1 billion. Mr Bowen said the government would reveal its position on tax deductibility when it responds to the Henry review next Sunday.

http://www.theage.com.au/business/financial-advisers-super-slice-to-get-axe-20100425-tlod.html

The keywords are: leading investment banks - money laundering - susceptible to white-collar crime...

Major banks linked to money laundering

MICHAEL WEST

April 20, 2010

POLICE and corporate regulators have raided homes and businesses to smash a crime syndicate that launders money through the stockmarket after getting inside tip-offs from leading investment banks.

The crime ring, whose network extends from New South Wales to Western Australia, uses young people with little means to extract cash from ATMs after successful share trades executed through Commonwealth Bank's online broker, CommSec.

Police raided the homes of two Deutsche Bank employees on April 9 searching for email and phone records and documents in connection with the WA syndicate. They were searching for trades in brewer Lion Nathan before an $8 billion takeover bid by Japanese brewer Kirin.

Shares in Lion Nathan jumped from $8 to more than $11 in late April last year when the deal was announced, delivering a stellar profit to those who had bought shares before the announcement. Among those who profited are people with links to organised crime in WA.

Deutsche Bank is not suspected of any wrongdoing and is co-operating with authorities in the investigation. The bank was, on the same day as the raids, issued with a notice to produce information by the Australian Securities and Investments Commission, with which it complied. The bank did not comment on the matter last night.

In late May last year, ASIC was alerted to suspicious trading in Caltex shares. Caltex's share price rose from $11 to $12 on news that it intended to buy Mobil's petrol stations.

Another leading investment bank has been the subject of preliminary ASIC inquiries over the Caltex trading but has not been issued with a notice to produce. One of its employees is alleged to have provided information to the syndicate about Caltex before the announcement.

The Caltex deal was later blocked on competition grounds but a taskforce from ASIC homed in on one $500,000-plus trade in which parties linked to the crime syndicate had benefited.

Sources said the syndicate members relied on young people to remit the cash by withdrawing $1000 amounts - the daily limit - from ATMs.

This was a method, said the source, of laundering money from illegal activities.

Spokespeople for CommSec and Deutsche Bank declined to comment about the investigation.

The trading in Lion and Caltex shares is one part of a wide-ranging investigation into insider trading in which several companies and individuals have been issued with notices to produce information. The crime syndicate is believed to have garnered trading tips from several sources and traded in a range of shares on the stock exchange.

The share trading has been conducted through what are thought to be fake company names along with fake names of individuals behind them.

Insider trading is notoriously hard to prove because stock tips are mostly provided by word of mouth and there is rarely a paper trail or recorded conversation to produce in evidence.

http://www.theage.com.au/business/major-banks-linked-to-money-laundering-20100419-spet.html

Looking for business & tax advice?

Beware who to go to.

Tax agent or accountant? Who to go to for advice?

MAX NEWNHAM

April 12, 2010 

WHETHER you are thinking of starting a business for the first time, or have been in business for many years, it is vitally important to get the right advice. In a lot of cases people get this advice from accountants. Unfortunately not all accountants were created equal.

In many cases people believe they have an accountant, when in actual fact they have a tax agent. Tax agents tend to mainly look back and are focused only on completing forms for the tax office and other regulators. Accountants on the other hand, as well as taking care of the compliance work, are more focused on the business and are also looking forward.

If you regard preparing financial statements as an administrative burden rather than an opportunity to gauge the health of your business, and a visit to the accountant as only slightly better than a dental appointment, a tax agent will probably be more than adequate for you.

If on the other hand you want to ensure you are operating your business in the most tax effective structure available, and want ongoing advice on how to maximise your profits while minimising taxes, you need an accountant.

The best way to judge is by asking the following questions;

•     Are you able to contact your accountant by phone relatively easily when you need them

•     Does your accountant return phone calls promptly and no later than the morning of the day after your call

•     Does your accountant suggest ways of improving your business or tax situation

•     Does your accountant answer your questions in a way you can understand or do they say they don't offer advice in that area

•     Is your accountant interested in you and your business, and

•     Does your accountant pay fines for problems caused by them

If you answered no to any of these questions you more than likely have a tax agent.

For some reason business owners find it hard to change accountants. This can often be due to the misconception that a new accountant will not know enough about their tax affairs. Nothing could be further from the truth. A good accountant should, in only a very short space of time, and using the financial statements and tax returns prepared by the previous accountant, obtain a very clear picture of how a business operates and what the tax and financial issues are.

The process of selecting a new accountant starts with the first phone call. If your call is not answered promptly, you are placed on hold for an excessive period of time, and are put through the third degree by a receptionist, the chances are they will not be any better than what you currently have.

If you get through to the accountant without too much trouble, you should ask them what they try to achieve for their clients. If the answer is all about lodging tax returns on time and other compliance issues, they will more than likely be a tax agent.

If the answer is that they assist clients to maximise the potential of their business and the profits, while ensuring they don't pay more tax than they have to, they will more than likely be an accountant.

In the first interview, once they have a quick review of the financial statements and tax returns, a good accountant will be able to ask intelligent question about how you operate the business and what you want from it, and offer initial advice on where they see things can be improved.

Source: http://www.smh.com.au/small-business/finance/tax-agent-or-accountant-who-to-go-to-for-advice-20100412-s2kx.html