Sympathy fine but action needed

Sterling First collapse: victims say redress plan has holes

Latest News
MORE TO DO: Alan Fardoe and his wife Jacky study the inquiry's recommendations.

MORE TO DO: Alan Fardoe and his wife Jacky study the inquiry's recommendations.

Aa

Homeless, stripped of life savings, seniors say compensation still at issue.

Aa

As one of more than 100 victims of the Sterling First Group housing disaster that left many seniors homeless and broke, Alan Fardoe has welcomed the results of a Senate inquiry into the 2019 collapse of the property group.

However, the spokesman for the Sterling First Action group, made up of affected seniors and family members, said the question of compensation for victims is still be resolved.

"Although we are getting sympathy from every quarter, we are not yet getting any action to remedy it," he said.

The Sterling Group scheme was marketed to retirees as an alternative to downsizing that would result in freeing-up cash to give them a more comfortable lifestyle and a long-term secure residential base.

Retirees handed over up to $200,000 for a lifelong lease on a home.

The Economic References Committee report was released on February 4.

The committee heard of the devastating financial and emotional impact of the Sterling Group collapse, which left many seniors homeless and stripped of life-savings.

Most affected tenant-investors submitted they did not have sufficient capital to buy another home - which for many was the reason they were attracted by the "rent-for-life" scheme to begin with.

Many indicated they were now either paying market rent in private dwellings, relying on social housing, living with relatives, or, in at least one case, forced to "couch surf" at the age of 80.

Alan said the inquiry had recognised that a proposed last resort redress scheme for victims of financial scandals, currently before parliament, was the best hope of compensation.

"But the scheme has holes in it because it excludes some important sub-sections of our people," he said.

Currently the Compensation Scheme of Last Resort would not apply to managed investment schemes and compensation for each claim would be capped at $150,000.

"We have had CHOICE lobbying on our behalf trying to get changes," Alan said.

"We believe we have the cross-bench support needed to get an amendment moved.

"But what the government then does is a different matter.

"We have made some progress but we don't have an end in sight at this stage."

Alan invested $151,000 in a home in Ravenswood before the collapse but said he is not as badly off as some others.

"I still have some assets and a home but others have been left homeless and penniless, the pension is all they have got.

"It is a very sad situation."

The senate inquiry raised "serious concerns" about the role of the Australian Securities and Investment Commission in the financial failure.

The committee stated it believed ASIC had enough evidence to act on concerns as early as 2017 - two years before the Sterling Group was put into liquidation.

The committee said it was clear the Sterling Group was promoting a highly complex scheme based on a flawed business model that linked long-term tenancy to the performance of an investment.

"The promoters of the scheme did not have the necessary skills to undertake such a business venture successfully, and the financial products being offered were completely inappropriate for the group targeted," the committee said.

"The fact that such a scheme could be offered to retail customers in the first place is a poor reflection on the current regulatory framework for managed investment schemes in Australia.

"The hands-off regulatory regime gave open slather to proponents of the scheme to wilfully argue to ASIC that they were in the right, without any onus on ASIC to investigate until it was too late."

The committee recommended the government consider extending ASIC's public warning power where there was reasonable grounds to suspect a financial product "has resulted, will result or is likely to result in significant consumer detriment".

CHOICE chief executive Alan Kirkland said the Sterling Group victims deserved compensation for the misconduct but the proposed Compensation Scheme of Last Resort would exclude them.

"The compensation scheme must be expanded to include managed investment schemes or injustices like this will continue to occur," he said.

To read the full report, click HERE

Aa