ASIC comments on Fincorp

ASIC's comment on Fincorp focussed on responsibility for prospectuses:

Responsibility under the Corporations Act for preparing prospectuses and for their accuracy is on the issuer and its advisers. Debenture holders also have the protection of the trustee. The trustee has a duty to exercise reasonable diligence to see that investments are sufficient to repay capital and interest owed to those debenture holders.

ASIC is not responsible for approving prospectuses. However, as part of its market surveillance, ASIC reviews a percentage of prospectuses, for proper disclosure. It has reviewed Fincorp prospectuses.

Since 2002, on six occasions ASIC forced Fincorp to improve the quality of its disclosure documents – including by court action.

Financial journalist Alan Kohler argues that Fincorp wasn't paying enough interest to justify the risk that investors took.

In the Eureka Report he offers "Kohler’s Law of Risk and Return: if you are risking total loss, the real return should be at least 100% in five years (which means 15% above the inflation rate), preferably with the potential for blue sky as well. "