When it’s boiled down, the clients of Opes Prime and Lift Capital were using money borrowed from ANZ, Merrill Lynch and Dresdner Kleinwort. It’s about time they took some responsibility over the Opes Prime and Lift Capital affairs.
Mick Gatto’s fruitless foray to Singapore last week following the money trial was a wonderful circus, but he was looking in the wrong direction: Mick should have been following the trail up, not down, and he and his mates should have shown up at 100 Queen Street to pay a visit to the CEO of ANZ, Mike Smith.
The money from these brokers came from ANZ, Merrill Lynch and Dresdner Kleinwort, and mostly the first two. With Lift Capital, another margin lender that went broke on Friday, it was only Merrill Lynch.
In other words, people were borrowing money from ANZ and Merrill Lynch using Opes and Lift as intermediaries.
If the clients were using real estate, or even cars, as collateral, Opes and Lift would be called brokers, and whether or not they collapsed or survived would be of no concern to the borrowers. The loan contracts would be with ANZ and Merrill Lynch. Even if those two collapsed it wouldn’t matter – the borrowers would keep their property and keep servicing the loan.
There has been a lot of discussion about the use by Opes, and possibly Lift, of Australian Master Securities Lending Agreements to secure the collateral for their loans, thereby transferring full title of that collateral to them and on to the ultimate lenders, ANZ and Merrill Lynch.
But the basic problem here is that borrowing against shares and other securities is less regulated than borrowing against real estate and cars. There is no justification for that and it should never have happened.
What’s more both ANZ and Merrill need to answer for using this regulatory loophole to take advantage of people.
ASIC’s attention is focused on the principles of Opes and Lift, but the real culprits, in my view, are ANZ and Merrill. They are the lenders here. Their contractual relationship might not have been with the borrowers – who are now coping with loss and stress – but their moral relationship was with them.
It was their money being borrowed, and they were using clowns and spivs as intermediaries to market their money.
And the other group that has a lot to answer for, especially in the case of Lift Capital, are the financial advisers who were recommending them. What due diligence were they doing for their clients? Or was this another case of commissions getting in the way of duty?
This story first appeared in Business Spectator