Stop dishonest practices on the Australian Stock Exchange and demand a Royal Commission.

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Nearly all of us are invested in the Australian Stock exchange whether it be our own investing or through our superannuation.  Currently the compulsory superannuation rate is 9.5%. This means for every person earning $50,000 a year $4750 goes into super per year.  If you are earning $100,000 a year $9500 goes into super. For the $100,000 category this becomes $190,000 invested into your super over twenty years.   This money cannot be touched until you reach pension age which is unfortunate for many people would like to use this money to pay off a mortgage.

 

If this superannuation money was invested well, it should multiply.  But it doesn’t. Our super accounts continue to increase in size but this is mostly because of all the weekly contributions and not from profits on our investments.  In many cases, people who choose ‘growth’ funds see losses on their super accounts. The question is why are our super funds not making money for us? The answer is very clear to those of us that invest for a living.

 

When compulsory super was introduced it opened the door to vast amounts of Australian wealth flooding the Australian stock market.  Very quickly investment banks captured our regulator and now it seems every executive appointment to ASIC is from one of these investment banks. These appointments to ASIC come from the very top - the Prime Minister.  Because of these appointments to our regulator, the ASX has been gamed to allow vast amounts of Australian wealth from our super accounts to be stripped from us into the hands of these investment banks.

 

Currently, amongst many other dishonest or dubious practices, ASIC allows

 

Practices that amount to naked short selling which are illegal.

Short selling during capital raises which destroys the share price making it very difficult for companies to raise capital at a fair price.

The short selling of emerging companies that require capital to develop new projects thereby placing them at the mercy of predatory interests and lenders. 

Super Funds to lend out their clients shares to short sellers who hide within custodian accounts and collude with their lenders and other short selling companies in predatory attacks to force share prices down (short sellers earn money when the price goes down). By lending to support short sellers, the holdings of ‘mums and dads’ are weaponised against their best interests and usually without their knowledge.

Exclusive after-hours trading for select parties where ownership can be exchanged without price discovery.

Abuses of algorithmic trading and short selling that enables prices to be manipulated. It often results in ASX companies becoming forced into severe under-valuations where they are vulnerable to being taken over at low prices. Examples include retirement home company Aveo and baby formula company Bellamy’s.

Collusive trading and coordinated shorting by Investment Banks

Privileges for investment bank brokers whereby they get to trade at an advantage over all other participants,

https://www.abc.net.au/news/2012-04-11/kohler-high-frequency-trade-parasites-at-heart-of-asx/3943052

Investment bank brokers flood the market with non-genuine algorithmic trades that continually show conflicts with the laws that govern trading. It is these trades that primarily set and maintain prices, not the genuine forces of supply and demand as required by a true market.

Investment Banks forcing companies into liquidation unnecessarily. Liquidators then under-sell company assets to insiders, price gouge, and generally arrange things for the benefit of creditors whereby shareholders have zero rights. Often these companies are then relisted on the stock exchange at high prices for the benefit of the new buyer but only after shareholders have lost all entitlements.

Coordinated pump and dump operations using well known investor forums

Manipulated private equity buyouts of iconic companies, looting them and then relisting the gutted shells with inflated valuations

Rampant and blatant insider trading that rarely leads to prosecution or conviction.

Enforceable undertakings where guilty parties are given slap-on-the-hand fines for serious misdemeanours, whereby the offenders simply move on to the next scam.

A sham approach to regulation that demoralises participants who go out of their way to report wrongdoing. Complainants will receive a standard letter that often doesn’t even refer to the problems raised and they are told that their correspondence will be filed. Invariably, nothing is done and the problems continue. Complaining can be a soul destroying experience.

Every experienced investor knows about these dishonest and disgraceful practices that have seen the ASX openly described as a ‘Cowboy Bourse’ and the ‘Wild West’, yet ASIC continues to turn a blind eye to it. Whether through under-funding or corruption, ordinary investors are not being represented by the body charged explicitly with enforcing the laws that govern our financial markets. Only a Royal Commission will have the power and gravitas to bring about the root and stem changes required to give ordinary investors a level playing field and to stop the ripping off of billions of dollars by the white collar criminals otherwise known as the investment banks.

Keep in mind that investment banks have willingly paid hundreds of billions of dollars in fines for rorting all of the world’s financial markets in return for not having to admit their guilt. Honestly, who pays exorbitant amounts in fines if they are innocent? What a sham. It simply means that the largesse extracted from fraud is many multiples of the fines that fraud attracts, and that the fines represent a miniscule cost of sustaining criminal operations. It is a great business model except you or I would be put into jail if we tried to utilise it.

We were told by former ASIC Chairman Greg Medcraft that ‘Australia was a paradise for white collar fraud’, and yet he forgot to even mention the share market, where wealth stripping activity runs at extraordinary levels.

And we saw how the banks were treating Australian consumers when fraudulent practices were exposed during the Royal Commission into banking and finance. Yet the Royal Commission’s brief was designed to exclude the Australian stock exchange from investigation. Why would that be?

Let’s demand a Royal Commission and let us truly see what is happening to our Super money. We receive meagre returns while the banks pocket billions each year and that is because the stock market is able to be gamed by the banks at our expense.  We need to stop the rorts. Imagine if those gains were fairly distributed.

 

The market must be radically reformed. It must be able to perform as originally intended. Australians need to be able to plan for their future and enjoy the benefits of their labour in an environment that promotes productive enterprise and wealth generation for all.

Currently, it is extensively compromised while being designed to benefit the privileged few. And laws are being broken in the process. It’s time to act.