Comments on: Opes investors fail at first hurdle

By: Andrew Reynolds

Andrew Reynolds — Fri, 09 May 2008 14:27:50 +0000

LE,
My guess is that the agreement effectively seperated the legal rights that arise from the ownership (dividends, voting etc) from the ownership of the shares themselves.
The loses that result from the sale of the shares would be a capital loss for tax purposes, so would not be able to be offset from the revenue received (i.e. the dividends).
Again, though - this will have to be up to the courts. It is going to be good fodder for a few QCs and SCs over the next few years.

By: Legal Eagle

Legal Eagle — Fri, 09 May 2008 04:55:31 +0000

I must confess that I don’t know the fine details of how the arrangement worked. However, it does seem on the face of it that the investors shouldn’t have to pay tax on the dividends… I wonder who had that liability?

By: Spiros

Spiros — Fri, 09 May 2008 04:09:24 +0000

Well, at the very least, it’s hard to see how they can be liable for the tax on those dividends. My argument is as follows. I own shares in BHP. You think you own them, but actually I do. As the owner of the shares, I am entitled to the dividends. Now I may choose to give those dividends to you, but the tax liability is still mine. You aren’t liable to pay tax on the value of this gift.

By: Legal Eagle

Legal Eagle — Fri, 09 May 2008 03:33:52 +0000

Spiros, the original owners did in fact get dividends and all the usual things that come with ownership of shares. While effectively they might have received many of the benefits we ordinarily associate with ownership, in fact legally speaking, because of the terms of the SLA, they didn’t own them…as they found out. Consequently, depending on the evidence, they may be able to make out a case of misleading and deceptive conduct on the part of Opes.

By: Spiros

Spiros — Fri, 09 May 2008 03:23:13 +0000

And, warming to my theme, were the original owners invited to vote on motions at AGMs, invited to participate in rights issues, buy backs, and all the other trappings of share ownership?

By: Spiros

Spiros — Fri, 09 May 2008 02:59:40 +0000

So who got the paid the dividends on the shares while they were “lent” to Opes (and on-lent to ANZ and Merrill Lynch)?

If the original owners got no dividends (and especially if they were told they had no right to them, because they were no longer the owners of the shares) then it would be difficult for them to claim that they thought they were the rightful owners.

On the other hand, if they receive dividends, then then the original owners could claim they were misled into believing that they in fact owned the shares.

By: Andrew Reynolds

Andrew Reynolds — Fri, 09 May 2008 02:53:54 +0000

LE,
I would agree. This is going to run for a while yet. That said, ANZ did have a prima facie right to sell the shares under their agreement with Opes and Opes’s agreements with their clients. If the clients signed agreements they did not have the power to sign (in the case of the super funds) then (perhaps) the funds might have claims against the trustees. Interesting in the case of a SMSF.
All the competing claims, though, will have to be sorted out in court, with hizzoner being correct that monetary compensation being the appropriate remedy. It should be fun.

By: Legal Eagle

Legal Eagle — Fri, 09 May 2008 01:05:36 +0000

Andrew, I think they should have lodged shareholder notices if they did in fact “own” the shares - but I doubt if they did so!

Stephen, agreed, it is like partly paid up shares. Those CFDs are scary beasts. All these margin dependant investment vehicles give me the heebies really (I’m not a gambler). Agreed, the government does need to regulate them so that inexperienced investors and the like don’t get burned too badly, particularly if such products are being advertised on TV as a “get rich quick” scheme.

Interestingly, I read in the SMH today that there are issues for ANZ that

(a) they took charges over superannuation funds and sold the shares (which they may not have been able to do); and

(b) the charge pursuant to which the sales were made was entered into only days before the liquidation…potentially raising issues of voidable preferences under Bankruptcy law, I presume.

I wonder if this whole matter will settle - but as the SMH article points out, the difficulty with numerous plaintiffs is getting them to agree on a settlement!

By: Stephen Lloyd

Stephen Lloyd — Thu, 08 May 2008 19:32:22 +0000

Slightly off topic, I think CFDs are a ticking time bomb too.

They are heavily advertised on Sky News now, and people who don’t know what they are doing can get into real trouble with them.

Losses are potentially bottomless, yet the advert on Sky News sates that you can effortlessly turn $300 into $10,000.

I give it a few years and there’ll be big problems with them if the Govt. doesnt take measures to regulate them in some way, preferably through disclosure and accountability, not through limitation or outright banning.

By: Stephen Lloyd

Stephen Lloyd — Thu, 08 May 2008 19:20:44 +0000

I fail to see how it is any different in nature to partially paid ordinary shares?

If a company is liquidated, and there are partially paid ordinary shares (a rare ocurrence these days), the shareholders are required to pay the outstanding amount.

I know its a little different in nature, but where liquidation is concerned, it seems to be the same doctrine to me?