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Looking forward to 2017 – another year of fraudbusting beckons

By Nigel Somerville, the Deputy Sheriff of AIM | Saturday 31 December 2016


 


That the London market – and especially AIM – is fleecing investors on a regular basis is a given in these parts. Of course, most companies are run by honest individuals but the regulatory set-up is failing to bring those lacking in morals to book and investors need protection. It is not even the community of BBMs who need to be looked after either – consider the plight of those whose cash has ended up in institutional hands such as Tom Dobell of M&G and despatched to the great central bank in the sky via the fraud Quindell.

My own small part in this fine website came about from being fleeced. I got sick of not being able to believe a word offered in an RNS without first “Fisk”ing the statement. Given that an RNS is supposed to inform investors, it is a pretty shoddy state of affairs when one has to do that. But it is even worse when the statement just turns out to be outright lies.

The problem is that the framework we think we operate under just doesn’t work or simply is not there. The great and the good would like you to think you are protected. You are not. Even when some action is taken, the penalties imposed are negligible. Or the wrong target is punished: why fine a company (which, in turn, punishes the investors already fleeced) when it is individuals who are acting in contravention of the rules of the game?

Audited accounts get passed by big and respectable audit firms, only for us (with a spot of digging) to find that they were seriously flawed. Audits are supposed to offer some reassurance that the accounts are free from misstatement whether by fraud or error. Sadly, that fine community seems to fall short of what investors believe it is there to achieve.

Of course, if Mr F Raudster is really determined to pull a fast one and tell serial lies to his auditor then it is more difficult for the auditor to spot the subterfuge. But when accounts don’t add up you do have to wonder. On the other hand, if auditors bothered to check everything properly (eg visiting the account-holding branch of a China Fraud’s bank) then some of the issues highlighted by this fine organ would never have arisen in the first place.

Then there are the regulators who simply ignore slam-dunk evidence of breaches. In the case of the oxymorons of AIM Regulation, the situation is laughable when they won’t even enforce their own rules. If you thought that AIM Regulation was there to protect you, think again. It is there to protect the LSE. Problems need to be swept under the carpet, away from view.

In many ways, then, it is not just the fraudsters themselves which are the problem, it is the facilitators of fraud. The regulatory set-up itself could, in some ways, itself be described as the biggest city fraud of all.

Meanwhile, the team at ShareProphets will continue to expose fraud, corruption and malfeasance. Somebody has to do it.

It doesn’t make us popular in the city, but we don’t care. The culture of cover-up and denial has to be changed and those charged with ensuring a level playing field are failing. Miserably.

In that vein, you can expect more of the same as we move into 2017. Indeed there will be ever larger frauds exposed here which will shock and amaze. If you thought Quindell was a one-off, think again. If you thought this sort of thing was the exclusive territory of AIM, or even the (sub-) standard list then you are in for a treat.

Watch this space – it is going to be a fun year!


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