29 August 2013
Wellington financial adviser David Robert Gilmour Ross (63) today pleaded guilty in the Wellington District Court to charges laid by the Serious Fraud Office (SFO) and the Financial Markets Authority (FMA).
A joint agency investigation between SFO and FMA into Ross Asset Management (RAM), and related entities, saw SFO charge Mr Ross on 13 June. The charges comprised four counts of false accounting and one count of theft by person in special relationship.
On 28 June FMA charged Mr Ross with one count of providing a financial service when he was not registered for that service, one count of knowingly making a false or misleading declaration or representation to FMA for the purposes of obtaining authorisation to become an Authorised Financial Adviser, and one count of supplying information or producing documents to FMA which he knew to be false or misleading.
The investigation into RAM and its related entities commenced in October last year when FMA received complaints from investors who had been unable to withdraw funds. FMA took immediate action to preserve investors’ funds by obtaining asset preservation orders and appointing receivers and managers to RAM and its related entities. A joint investigation with SFO subsequently commenced.
The SFO charges alleged that Mr Ross conducted a Ponzi scheme which he disguised by falsely reporting clients’ investments. Large portions of client portfolios shown as invested through a broker ‘Bevis Marks’ were fictitious and never existed, resulting in an overstatement of investment positions by more than $380 million.
More than 1,200 RAM client accounts have been affected by Mr Ross’ scheme.
SFO Acting Chief Executive, Simon McArley said, “While a guilty plea does not address the significant losses incurred by a large number of victims, it will bring some relief to those victims. SFO and FMA have worked well together, applying their respective specialist skills in order to progress the investigation quickly and enable this timely outcome.”
FMA Head of Enforcement, Belinda Moffat said, “The financial adviser regime relies on advisers providing truthful information when they apply for any licence and Mr Ross’ conduct has seriously undermined the integrity of that regime. We are committed to restoring investor confidence and will continue to respond immediately to investor complaints against market participants.”
Mr Ross has been remanded in custody to reappear on 24 October to set a sentencing date.
Tony Reid on 021 739 052 or [email protected]
Note to editors
Background to investigation
Since 1989, David Robert Gilmour Ross has operated a funds management business, Ross Asset Management Limited (RAM). The RAM office was located in Wellington. RAM was the key trading entity for the Ross Group and Mr Ross had sole responsibility and decision-making authority for all aspects of RAM.
Mr Ross was approved as an Authorised Financial Adviser (AFA) by FMA on 12 July 2011. His authorisation was suspended in November 2012 and his registration as a financial services provider cancelled in February 2013, which resulted in the termination of his authorisation as an AFA.
Following an application made by FMA under the Financial Advisers Act 2011, Mr Ross and RAM were placed into receivership in early November 2012 along with Mr Ross’ other associated entities. Eight of the Ross entities were placed in liquidation in December 2012.
Crimes Act offences:
Section 220 Theft by person in special relationship
(1) This section applies to any person who has received or is in possession of, or has control over, any property on terms or in circumstances that the person knows require the person—
(a) to account to any other person for the property, or for any proceeds arising from the property; or
(b) to deal with the property, or any proceeds arising from the property, in accordance with the requirements of any other person.
(2) Every one to whom subsection (1) applies commits theft who intentionally fails to account to the other person as so required or intentionally deals with the property, or any proceeds of the property, otherwise than in accordance with those requirements.
(3) This section applies whether or not the person was required to deliver over the identical property received or in the person's possession or control.
(4) For the purposes of subsection (1), it is a question of law whether the circumstances required any person to account or to act in accordance with any requirements.
Section 252 False accounting by officer or member of body corporate
(Pre 2003 amendments)
Every one is liable to imprisonment for a term not exceeding 7 years who, being a director or an officer or a member of any company, or body corporate, with intent to defraud,—
(a) Destroys, mutilates, alters, or falsifies any book, account, valuable security, or document belonging to the company or body corporate, or concurs in so doing; or
(b) Makes or concurs in making any false entry in, or omits or alters, or concurs in omitting or altering, any material particular from or in any such book, account, valuable security, or document.
Section 260 False accounting
Every one is liable to imprisonment for a term not exceeding 10 years who, with intent to obtain by deception any property, privilege, service, pecuniary advantage, benefit, or valuable consideration, or to deceive or cause loss to any other person,—
(a) makes or causes to be made, or concurs in the making of, any false entry in any book or account or other document required or used for accounting purposes; or
(b) omits or causes to be omitted, or concurs in the omission of, any material particular from any such book or account or other document; or
(c) makes any transfer of any interest in a stock, debenture, or debt in the name of any person other than the owner of that interest.
Section 11 Financial Service Providers (Registration and Dispute Resolution) Act 2008 - No being in business of providing financial service unless registered
(1) A person to whom this Act applies must not be in the business of providing a financial service unless that person is registered for that service under this Part.
(2) Every person who knowingly breaches subsection (1) commits an offence and is liable on … conviction,—
(a) in the case of an individual, to imprisonment for a term not exceeding 12 months or to a fine not exceeding $100,000, or to both; or
(b) in the case of a person who is not an individual, to a fine not exceeding $300,000.
Section 136 Financial Advisers Act 2008 - Offence of false declaration, etc, in support of application for authorisation or grant of QFE status
(1) A person (“A”) commits an offence if A has, for the purpose of obtaining authorisation or the grant of QFE status, either for A or for any other person,—
(a) either orally or in writing, made any declaration or representation knowing it to be false or misleading in a material particular; or
(b) produced to the FMA or made use of any document knowing it to contain a declaration or representation referred to in paragraph (a); or
(c) produced to the FMA or made use of any document knowing that it was not genuine.
(2) A person who commits an offence under this section is liable on … conviction to a fine,—
(a) in the case of an individual, not exceeding $100,000:
(b) in the case of an entity, not exceeding $300,000.
Section 61 Financial Markets Authority Act 2011 - Criminal liability for obstructing exercise of powers
(1) Every person commits an offence who—
(a) refuses or fails, without reasonable excuse, to comply with a notice under section 25; or
(b) in purported compliance with a notice under section 25, supplies information, or produces a document, or gives evidence, knowing it to be false or misleading; or
(c) resists, obstructs, or delays a person acting under a warrant issued under section 29; or
(d) having been required under a notice under section 25(1)(d) to appear before the FMA or a specified person referred to in that paragraph, for the purposes of any matter, without reasonable excuse—
(i) refuses or fails to appear; or
(ii) refuses to take an oath or affirmation as a witness; or
(iii) refuses to answer any question; or
(iv) refuses or fails to provide any document or information that the person is required to provide; or
(e) deceives or attempts to deceive or knowingly misleads the FMA or a specified person referred to in section 25(5) in providing evidence to either of them; or
(f) wilfully acts in contravention of any order made by the FMA under section 44.
(2) A body corporate commits an offence under subsection (1)(d) if it is required to appear under section 25(1)(d) and, without reasonable excuse, an authorised representative on its behalf refuses or fails to appear, refuses to take an oath or affirmation as a witness, refuses to answer any question, or refuses or fails to provide any document or information that the body corporate is required to provide.
(3) Every person who commits an offence against subsection (1) is liable on conviction to a fine not exceeding $300,000.
The Serious Fraud Office (SFO) was established in 1990 under the Serious Fraud Office Act in response to the collapse of financial markets in New Zealand at that time.
SFO’s role is the detection, investigation and prosecution of serious or complex financial crime. SFO’s focus is on investigating and prosecuting criminal cases that will have a real effect on:
- business and investor confidence in our financial markets and economy
- public confidence in our justice system and public service
- New Zealand’s international business reputation.
SFO operates three investigative teams:
- Evaluation and Intelligence;
- Financial Markets and Corporate Fraud; and
- Fraud and Corruption.
SFO operates under two sets of investigative powers.
Part I of the SFO Act provides that it may act where the Director “has reason to suspect that an investigation into the affairs of any person may disclose serious or complex fraud.”
Part II of the SFO Act provides the SFO with more extensive powers where: “…the Director has reasonable grounds to believe that an offence involving serious or complex fraud may have been committed…”
SFO’s Annual Report 2012 sets out its achievements for the past year, while the Statement of Intent 2013-2016 sets out the SFO’s three year strategic goals and performance standards. Both are available online at: www.sfo.govt.nz
FMA was established on 1 May 2011 under the Financial Markets Authority Act 2011, in response to the need to address failures in the financial markets, made evident from the global financial crisis. The Government recognised that New Zealand required a single conduct regulator to proactively monitor and enforce securities legislation.
FMA is an independent Crown entity and has the following functions:
- to monitor compliance with, investigate contraventions of, and enforce securities and investment law, financial reporting law, and companies law, in respect of financial markets participants;
- to promote confident and informed participation in the financial markets;
- to license and supervise particular financial markets participants, including financial advisers, trustees and statutory supervisors, auditors, and securities markets;
- to monitor and conduct inquiries and investigations into financial markets and financial markets participants; and
- to keep the law under review.
FMA is committed to taking enforcement action against those whose behaviour threatens market integrity and investor confidence in New Zealand.
More information about FMA can be found at www.fma.govt.nz
Case: David Ross and Ross Asset Management Limited