Over the past year, Big Chilli has published several articles about the financial devastation caused by unscrupulous, unlicensed “financial advisers”. The magazine appeared to be committed to alerting the public to the deceptions, ripoffs, and criminality which have plagued the country’s financial services sector. Now, sadly, Big Chilli has become a facilitator.
On pages 18 and 19 of the latest edition of Big Chilli, there is a conspicuous advertorial for an unlicensed, unregulated investment advisory company called South East Asia Capital (SEAC):
The advertorial is loaded with blatantly false, misleading, and hypocritical statements, but that’s only the beginning of the problems.
All of SEAC’s Directors Previously Worked for a Company on the Thai SEC Investor Alert List
According to the Thai SEC’s website, no company named South East Asia Capital (SEAC) is licensed, nor are any of its directors.
A Google search indicates that all of SEAC’s directors—Ian Ferguson, Billy Popham, and Stephan Tierney—previously worked at MBMG International Co., Ltd, a company which is now on the SEC’s Investor Alert List for unlicensed securities and derivatives business.
Section 289 of Thailand’s Securities and Exchange Act states that any person who undertakes securities business without a license “shall be liable to imprisonment for a term of two to five years and a fine from two hundred thousand baht to five hundred thousand baht and a further fine not exceeding ten thousand baht for every day during which the contravention continues.”
Below are photos from the Pattaya Mail, which show the SEAC gang when they apparently worked at MBMG International:
Popham lists MBMG International as a previous employer on his LinkedIn profile:
Tierney previously had an MBMG International email address:
Ferguson was previously listed as MBMG International’s Sales Director:
MBMG International is a part of the MBMG Group. Anyone who follows Andrew Drummond’s website will probably recognize the name. Last year, Drummond exposed the secret history of an MBMG analysist, Stephen Hinch, who in the 1990s “was deported from the United States for stealing client funds.” Hinch was subsequently fired. Drummond also revealed that MBMG employed Alan Hall from 2005-2006 and maintained a business relationship for two more years. After leaving MBMG, Hall began recklessly flogging the notorious LM Managed Performance Fund, a high commission Ponzi scheme which collapsed in March 2013. Hall subsequently fled Thailand.
Links to Drummond’s articles are here:
- British Run Financial Advice Company – Put on Thai SEC Investors’ Warning List (26 June 2014)
- Foreign Financial Men in Thailand – Exposed! A Cover Up (1 July 2014)
- FIRED! MBMG Economic Analyst Goes after Being Economical with the Truth (9 July 2014)
A few months ago, Drummond also revealed that MBMG previously had a long business relationship with Cobus Kellermann, one of the key players in the allegedly massive Belvedere Management fraud. According to a statement issued by MBMG, the company cut ties with Kellerman in 2012 before there were any fraud allegations. Drummond says, “The association between [MBMG and Kellerman] seems to have dated back to at least 2004.”
The link to Drummond’s article is here:
[Note: After this blog post was published, MBMG Group Managing Partner, Paul Gambles, contacted the author. Gambles says that MBMG International was placed on the SEC Investor Alert List after a client complained to the SEC. Gambles claims that MBMG International did not break Thai licensing laws, and that the client’s complaint was unsubstantiated. The identity of the alleged complainant is not known and so has not been contacted for comments.
Archived snapshots of the MBMG International website from 2009 and 2010 can be found here:
If one clicks on the “Meet the Team” section of the website, one will find that Popham and Ferguson are listed as “client advisors”. Cobus Kellermann is listed as a fund manager. On the “Services” section of the website, MBMG’s “core business” is stated as “financial planning and investment advice”.
The only company in the MBMG Group that has obtained an SEC license to perform investment advisory services is MBMG Investment Advisory Company Limited. The “Commencement Date” for that license is listed as Jan. 2, 2014. Paul Gambles is the only person who is currently listed as a licensed representative.]
The Great Insurance Wrapper Ripoff
In its advertorial in Big Chilli, SEAC claims:
“We have based our business model on the UK Retail Distribution Review (RDR) that was introduced in 2013…Like the UK, our Preferred Investment Partners pay us a small ongoing fee from their funds under management, taken out of their annual management charge. Of course, if they fail to grow the client’s investments the client can elect to switch out at any time without charge.”
SEAC’s claims are both false and misleading.
Its “preferred investment partners” are discretionary investment managers. In the UK, discretionary investment managers are banned from paying kickbacks to financial advisers or any firm “which makes personal recommendations to retail clients in relation to retail investment products.” (FCA Policy Statement PS14/1)
Thus, SEAC’s business model is not based on RDR, and it is not “like the UK”.
Also, while SEAC emphasizes that the trail commission on the investments is allegedly “small” and that the investor can “switch out at any time without charge”, SEAC fails to mention that it intends to place these investments in high-fee, high-commission insurance wrappers (portfolio bonds and savings plans) with lock-ins of up to 8 years or more. Investors cannot “switch out” unless they pay a hefty exit penalty. The commissions are so high that one insurer, Royal Skandia, was sued for bribery in Hong Kong.
Here’s an excerpt from the SEAC advertorial:
SEAC was dishonest about a number of things in its advertorial, but it told the truth when it said, “Many people still entrust the crucial role of managing their money to people who are not regulated or qualified, financial witchdoctors who gamble with the hapless investor’s assets while charging high commissions.”
Red Flags Surround ALL of SEAC’s “Preferred Investment Partners”
SEAC speaks highly of its three “preferred investment partners”—Apollo Multi Asset Management, Newport Private Wealth, and Siam Knight Fund Management—but a little bit of research uncovers several troubling facts.
The most obvious red flag is that all of these investment companies (as well as the insurance companies) have chosen to distribute their products through SEAC—an unlicensed, unregulated financial advisory firm.
Apollo: Entangled in the Belvedere Management Fraud
Apollo Multi Asset Management is based in the UK. Less than two months ago, Professional Adviser magazine reported that:
“[Apollo Multi Asset Management] has been forced to freeze redemptions on one of its funds [the Four Elements Apollo fund], after becoming caught up in an investigation by the Mauritian regulator into an alleged Ponzi scheme [operated by Belvedere Management].”
Prudent financial advisers would not risk putting their clients’ money with fund managers who are “caught up” in a fresh Ponzi scheme investigation. The advisers at SEAC don’t seem to mind though, possibly because they, as former employees of MBMG Group, had a prior business relationship with Kellermann of Belvedere Management.
Newport: Sales Executive Previously Promoted the LM Ponzi Scheme
Newport Private Wealth is based in Australia. The company’s head of “business development” in the Far East is Cameron Knox, former CEO of the Financial Partners group and current CEO of Imperium Capital, a company which is part of the Financial Partners “global affiliation”.
The Financial Partners “global affiliation” was one of the most aggressive sellers of the LM Managed Performance Fund, a massive Australian Ponzi scheme that has left thousands of victims devastated. Knox was dispatched to Australia immediately after the LM scheme collapsed, for the purpose of doing what might be called “belated due diligence”. A group of victims in Thailand recently filed a complaint against one of his company’s advisers, who was flogging the LM fund without a license.
LM is not the only fraudulent fund that Financial Partners has promoted. Just as scandalous is the Lighthouse Mutual Fund, whose investors have also suffered total losses. Former chairman of the Financial Partners group, Sean Kelleher (now CEO of Mondial), was one of Lighthouse’s directors. Some victims (in contact with the author of this blog) allege that Kelleher’s conflicts of interest were not disclosed when the Lighthouse fund was introduced to them.
In addition to the Lighthouse and LM scandals, Financial Partners was also involved in the Arch Cru investment fraud. FT Adviser reports that Arch incurred “losses of approximately $8.9m on an investment into international IFA firm Financial Partners Group relating to a joint venture to market Arch products in Asia“. The Arch products went up in smoke, along with the $8.9m investment.
Newport Private Wealth’s founder and director, Andrew McKay, has had a business relationship with Knox and the Financial Partners group for more than a decade.
The “About Us” section of Newport’s website claims: “We are independent & objective & therefore we are not tied to the products (& commissions) often associated with larger groups.”
However, Newport admits that it invests clients’ money mostly in a set of 8 funds, called Harmony, which are managed by a company in London called Momentum Global Investment Management (MGIM).
Several sources say that MGIM’s South African parent company recently purchased Financial Partners Limited in Hong Kong. This is corroborated by the fact that the home page of Financial Partners’ website currently displays a video produced by MGIM:
Siam Knight: Recently Fined for 6 Separate Regulatory Violations (Including One Offense)
Siam Knight Fund Management (SKFM) is based in Thailand. On 10 February 2015, the Thai SEC fined SKFM 650,600 baht for six different regulatory violations. One of those violations was a criminal offense.
According to the SEC, “[SKFM] prepared financial statements for the year 2011 onward by stating inaccurate information making higher equity rather than in actual value.”
Jeremy King is the current CEO of SKFM. In the 1990s, King was the managing director of Kerry Securities in Hong Kong. After a two and a half year investigation, the SFC publicly reprimanded Kerry Securities in 1997 for regulatory breaches. King resigned from Kerry Securities in July 1996 under suspicious circumstances. He appears to be one of the individual targeted in the SFC’s investigation.
Excessive Fees and Commissions
A slew of Nobel Prize-winning economists advise investors to avoid high-cost actively managed funds and to instead buy low-cost index funds. The most popular ETF index funds have annual fees of 0.15% or lower.
In contrast, actively managed funds usually have fees that are ten times higher—around 1.5%.
How do the fees of SEAC’s “Preferred Investment Partners” stack up by comparison?
SKFM does not disclose any information about its fees on its website, which probably means that the fees are so appallingly high that it is necessary to hide them.
Apollo claims to waive its discretionary management fee. However, it admits to investing 60% of clients’ money in funds that it managers. These funds have their own fees, which range from roughly 2 to 3.4%.
The fees are quite high, but Newport’s fees are even higher.
Newport charges 1% for its so-called “independent” discretionary management service. It then invests clients’ money primarily in the eight Harmony Funds managed by Momentum Global Investment Management (MGIM). The Harmony Funds have their own additional fees, which range between 2.6 and 4.5%:
Newport’s 1% discretionary management fee and the 2.6 to 4.5% fund fees are in addition to the insurance wrapper fees, which by themselves can be over 6% during the initial allocation period.
In total, investors will be paying at least 5% per year, possibly a lot more.
How Much Does SEAC get?
Newport discloses that it kicks back 0.5% of the 1% discretionary management fee, plus all of the 0.5% trail commission from the Harmony Funds.
The insurance wrapper kickback is much higher. For an insurance-wrapped savings plan with a 25-year lock-in, the upfront commission is roughly equal to all of the money that the investor pays during the first year. For a portfolio bond, the commission is 6-8% of the amount invested.
Big Chilli Magazine Facing Hong Kong Wrath
In the latest edition of Big Chilli, just a few pages back from the outrageous SEAC advertorial, Big Chilli also published an article about this blog, called “Financial Advisers Facing Hong Kong Wrath“:
The article described how this blog had exposed several financial advisers for operating in Thailand without a license.
Thanks to Big Chilli’s bizarre and reckless editorial decisions, SEAC can now be added to the list of exposed “financial advisers”.
Assuming Big Chilli cares about its reputation and the financial safety of its readers, then, in its next edition, Big Chilli ought to publish a public apology, along with a note of caution regarding SEAC and its investment partners.
Unlicensed, Thailand-Based Financial Adviser Expands Illegal Business Operations Into Hong Kong (The Rape of Hong Kong – April 3, 2015)
Unlicensed Financial Advisers Defy Thai Regulator After Being Placed on Investor Alert List (The Rape of Hong Kong – April 1, 2015)
Hong Kong-Headquartered Financial Advice Groups Placed on Thailand’s Investor Alert List (The Rape of Hong Kong – March 20, 2015)
Swimming with Dolphins or Drowning with Sharks: Who Is Looking after Your Investments? (SEAC Advertorial) – (The Big Chilli – May 2015)
Financial Advisers Facing Hong Kong Wrath (The Big Chilli – May 2015)
Suffering from LM (The Big Chilli – April 2015)
Questions that All IFAs Need to Answer (SEAC Advertorial) (The Big Chilli – April 2015)
Big Mango Investment Query (The Big Chilli – April 2015)
LMIM Scandal – The Anger Spreads – (The Big Chilli – May 2014)
The LMIM Collapse: One Year Later, an Investor Speaks Out (The Big Chilli – April 2014)
Expat Investors Face New Fears Over “Illegal” Fund (The Big Chilli – April 2014)
Desperate Plight of Senior Expat Investors (The Big Chilli – March 2014)
Expats Stand to Lose Their Investments After Australian Fund Collapses (The Big Chilli – Sept 2013)