The report which eventually gave rise to the managed investments régime in the Corporations Act was report No 65 by the Australian Law Reform Commission – Collective Investments: Other Peoples Money, brought down in 1993. That report identified three types of risk faced by investors in collective investment schemes:
- investment or market risk – the risk that the investment will perform poorly or that the market as a whole will decline;
- institution risk – the risk that the operator of the scheme will collapse; and
- compliance risk – the risk that the managers will not follow the rules or will act dishonestly or fraudulently.
At Fawkner Property we are most conscious that we are managing other peoples money – your money. Here is how we deal with these types of risk.
Investment returns arise from the same source as investment risk. A risk-free investment is a theoretical concept, not a reality. The Report recommended that the law should not try to protect individuals from investment risk but, rather, to ensure that investors are given, as clearly and simply as possible, all the information they need to fully understand and judge for themselves the risks involved in the investment.
Fawkner Property produces an information memorandum for each property syndicate to explain to potential investors the risks involved in the investment. The language used in the information memorandum and the layout are designed to promote understanding.
In a property syndicate, the greatest opportunity to minimise investment risk is before the purchase of the property. Fawkner Property implements an intensive due diligence process for establishing a property syndicate. The due diligence process is outlined here.
Investors in Fawkner Property syndicates have full access to the trust deed governing their syndicates and the annual financial statements. Progress reports are provided to keep investors informed. Personal contact with the directors and staff of Fawkner Property is welcomed, if there are any questions.
Fawkner Property is a small company and passes on to investors the economies of hands on management without layers of bureaucracy. In order to ensure that the ownership of the syndicate assets and the continuity of the syndicate can not be seriously affected by financial difficulties encountered by the manager, the ownership of the properties and other assets is separated from the management of the syndicate.
The trustee company, Farrell Heidelberg Pty Ltd, is a special purpose trustee company and does nothing other than own assets on behalf of investors. The trustee appoints Fawkner Property to manage the syndicates and can appoint another manager, if this becomes necessary in the interests of investors.
The investors in each syndicate can change the trustee by a resolution of investors holding 75% of the units. The trustee is not allowed to be an investor.
A good compliance culture comes from the inside. It reflects the corporate values of the organisation. Fawkner Property managing director Owen Lennie has been a representative under a licence issued under the corporations law since 1989. He drives the compliance culture of Fawkner Property.
In addition, Fawkner Property holds Australian Financial Services Licence number 437334, issued by the Australian Securities and Investments Commission. A copy of this licence can be seen here. It is a condition of this licence that Fawkner Property implement compliance measures to ensure compliance with all financial services laws.
All directors and authorised representatives of Fawkner Property must undergo police and insolvency checks, as well as continuing professional and compliance training. Fawkner Property must lodge an annual report with ASIC and is subject to ASIC oversight.
Annual financial statements for each syndicate are compiled by an independent accountancy firm, to ensure compliance with financial reporting requirements.