HIH court decision strikes blow for shareholder class actions

Image courtesy of JanPietruszka at FreeDigitalPhotos.net

Image courtesy of JanPietruszka at FreeDigitalPhotos.net

The insurer HIH went broke in 2001 but the fall-out from the group collapse continues with a recent court decision in favour of investors.

The NSW Supreme Court has awarded damages to investors who bought shares in HIH when the share price was inflated by misleading information released by the company.

The shareholders were able to prove “indirect causation” or that they had suffered loss even though they did not rely on an overstated profit figure when buying their shares.

An analysis by Damian Clancy and Paul Bannon of legal firm Colin Biggers & Paisley says the decision sets a precedent and is significant for shareholder class actions.

“So long as a shareholder can prove that a corporation’s misleading or deceptive conduct (or material omission) artificially inflated the price of that corporation’s securities, the shareholder may be entitled to recover the loss and damage suffered by reason of that fact, even if the shareholder did not rely upon the relevant conduct,” they say.

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Superannuation starting to replace age pension

retirees bike shutterstockMore Australians plan to live on their superannuation savings rather than the age pension.

When the Australian Bureau of Statistics surveyed 3.8 million workers on their plans for retirement, it found 53% of the group – all people aged over 45 years – expected their main source of retirement income to be super, an annuity or an allocated pension.

Only 19% of those who have actually retired tapped superannuation as their main source of income.

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Government earns $4.5 billion from bank guarantee

Death_to_Stock_Photography_NYC_Skyline_4Remember the Commonwealth Government bank guarantee?

Implemented in November 2008 at the height of panic during the global financial crisis, the guarantee gave the Australian financial system a much-needed injection of confidence by enabling banks to raise funds.

The scheme ended late last year. No claims had been made and the Government had earned $4.5 billion in fees.

The fears of 2008, when major companies and banks around the world were failing, are recalled in a study by Carl Schwartz and Nicholas Tan of the Reserve Bank of Australia.

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Land banking scam exposed

shutterstock_196533755The Federal Government faces calls to regulate property investment advisors in the same way as financial advisors following an exposé of land banking scams.

Many Australians have invested in land developments that will prove to be worthless, having been enticed by high-pressure sales tactics and misled into thinking they are buying land that will soon jump in value.

The Senate Economic References Committee has called for tighter controls on property investment advisors, saying they should be regulated by the Corporations Act.

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Innovate or perish

DocklandsYou can make your fortune or blow your dough by investing in innovation, but nations need it remain competitive, which is why the Federal Government is proposing tax breaks for investors.

The Government is consulting on its proposals and how to define an “innovation company”.

It will be vital to set eligibility criteria that ensures money goes into early stage innovation projects, under a strategy announced in December as part of the Federal Government’s National Innovation and Science Agenda.

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Money for nothing

Consumer advocates have long been concerned that debt management firms charge people for services they can access for free.

Consumers suffering financial hardship are being charged a variety of fees by firms that promise to help restructure personal debt and offer no refund if they fail.

The fees are high and often opaque, according to an investigationDTS post it started by the Australian Securities and Regulation Commission (ASIC) following complaints by consumer advocates, banks, lawyers and ombudsmen schemes.

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Card market has plenty of competition, but not on interest rates

The credit card market is fiercely competitive, but lenders are battling it out on reward and loyalty features rather than interest rates.

A senate inquiry has found that competition is generally more intense on less important card features, such as rewards and transfer programs.

The Senate Economic References Committee’s reportIMG_0102 released prior to Christmas says consumer inertia means many people have the wrong product for their needs and often don’t know the interest rate they are paying.

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How superannuation fails women

Death_to_stock_photography_Vibrant (4 of 10Generous tax benefits for superannuation and limited controls on contributions both magnify how the system works against women, researchers at Curtin University have told the Senate inquiry into economic security for women in retirement.

High-income earners and people with flexible assets that can be moved into super benefit from the structure of superannuation, say researchers from Curtin’s Women in Social and Economic Research (WISER) unit.

“Because women are underrepresented in these groups, they receive a relative small share of the benefits of the increasingly large tax expenditures on superannuation.”

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Superannuation temptations lead to fines

DTS post itThe pot of money in a self-managed super fund (SMSF) is a too big a temptation for some when they’re under financial stress.

Case law is building, as the tax office gets tougher on people who breach the strict rules on how superannuation may be managed and invested.

The Australian Taxation Office (ATO) is winding up SMSFs, taking trustees to court and seeking a range of orders.

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Credit card rates “sticky” despite competition

IMG_0102There is plenty of competition in the credit card market and consumers should shop around, Reserve Bank of Australia (RBA) Assistant Governor Dr Malcolm Edey has told a senate inquiry into credit card interest rates.

But the RBA says card interest rates remain “sticky”.

Rates vary widely and some are higher than “can easily be explained”, Dr Edey told the Economic References Committee public hearing on August 27.

Rates can be as high as 20% and the average is 17%, which would give card issuers an interest margin of 10% above their funding costs and losses.

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