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George Wang's rescue of BBY part of 'bridge to Asia' - The Australian Financial Review

AIMS Financial Group chairman and chief executive George Wang believes Australian business is missing opportunities in China simply due to ignorance. David Rowe

Source: The Australian Financial Review  By Tony Boyd

The purchase by George Wang of  failed stockbroking firm BBY is the logical extension of his 20 year strategy to build a financial services business closely tied to capital flows from China.

Wang is a very patient man. He is willing to make a long-term commitment to BBY and rebuild its position in the market.

His patience is shown by his eight-year time horizon for breaking even on his investment in the Asia Pacific Stock Exchange (APX).

APX was meant to be the "bridge to Asia" for Australian investors wanting to buy shares directly in Chinese companies on a trading platform based in Australia.

After six years of operations APX loses money and only two Chinese companies have listed on the exchange.

The fundamental problem with Wang's APX is that it is an offer-only market. In other words, there are only sellers on the exchange and no buyers.

That has created a difficult situation for anyone who bought shares in the two companies listed on the exchange. What's worse, one of the companies, Zhonghuanyun Holdings Group, missed its prospectus profit forecast by 95 per cent.

However, it should be noted that in keeping with every aspect of his business, Wang has employed experts in their fields. APX is chaired by former securities regulator Ray Schoer and its board includes former Merrill Lynch Asia Pacific chairman Greg Bundy. The chief operating officer of APX is former ASX senior executive David Lawrence.

Other talented people working within the AIMS Financial Group include Brett Spork, who used to run E*Trade Australia, former ASX and Pershing Securities executive Adam Joseph and former corporate finance executive from CIMB and RBS, Mike Netterfield.

Spork has been seconded to BBY to assist the new chief executive Craig Mason, who joined the firm from Pershing Securities, where he was non-executive chairman. Before Pershing, Mason was country head of BNY Mellon Australia.

Mason was not giving much away about the future strategy of BBY on Wednesday except to say that there will be no repeat of the mistakes made under former management led by Glenn Rosewall.

It is now common knowledge that Rosewall took on too many responsibilities, did not delegate important issues to senior staff, failed to understand the risks inherent in the options trading business and allowed the firm to function with inadequate accounting systems.

Mason says the firm will offer a broad array of products. But it will not allow its risk management to be dictated by the products that generate the most commission for dealers.

Wang's broking business, AIMS Securities, has changed its name to BBY Asia Pacific. That allowed the firm to hit the ground running yesterday with its own Australian Financial Services Licence.

BBY issued its first research note under Wang's ownership with the release of a speculative buy on Geopacific Resources.

The BBY acquisition provides the opportunity for Wang to build on the successful broking/investment banking model that has worked well at other firms.

This involves putting the corporate finance division at the heart of the firm. The corporate financiers take the lead in finding undervalued companies with high growth trajectories.

These companies make ideal clients because they need capital to grow and this is supplied by capital raisings through the firm.

The research department remains independent of the corporate finance arm but it plays an important role in identifying the high growth companies at the core of the strategy.

Wang is brimming with optimism about the opportunities for Australia to sell financial services in China.

He recently took 100 financial advisers to Shanghai for a conference and was shocked to find that half of them had never been to China.

He believes Australian business is missing opportunities in China simply due to ignorance.

His long-term vision for AIMS Financial Group is for it to be a conduit for Chinese capital flows into Australia as well as a key adviser for Australians seeking advice on how to invest in China's high-growth companies.

It was with that vision in mind, that Wang this month signed a memorandum of understanding with the China Beijing Equity Exchange to promote the idea of Chinese companies listing on the APX.

AIMS Financial Group has three offices in China and Wang hopes to open a BBY office in Shanghai.

Wang's optimism is evident from his claim that there are about 30 Chinese companies in the pipeline for listing on the APX. 

His expansion in Asia and his investment in a stock exchange in Australia have given Wang high level access to influential politicians. He is said to be close to Assistant Treasurer Josh Frydenberg and parliamentary secretary to the ministers for trade and the foreign minister, Steve Ciobo.

Wang knows the chairman of the Australian Securities and Investments Commission, Greg Medcraft well thanks to a mortgage securitisation deal in 1999 which was lead managed by Societe Generale when Medcraft worked there.

Regal Pickle

Chanticleer has sympathy for all those involved in the chain of events at hedge fund manager Regal Funds Management following a decision by the Australian Securities and Investments Commission to issue notices to chief investment officer Philip King for a compulsory examination relating to a trading event in 2013.

In a statement issued on Monday, King made it clear to investors in the 10 Regal investment strategies with total assets under management of $1.6 billion that he did not break any laws or regulations and that he believed he would be cleared of any wrongdoing.

The statement stressed that Regal operated under strict governance rules.

But it is believed there was some uncertainty at board level about whether or not the company should disclose the ASIC notice immediately to investors. Precedents would point to there being no disclosure until after the matter is resolved.

The board comprised Philip King, his brother Andrew, and Chuak Chan and David Lees from Westpac Banking Corp subsidiary Ascalon Capital Managers, which owns 30 per cent of Regal.

The content of Regal's confidential boardroom discussion was revealed in another note to investors on Wednesday night.

It said: "There was a difference of opinion on the board as to whether immediate notification of the notice of hearing was warranted or whether further information and advice should be obtained.

"As a consequence, Mr Chan and Mr Lees resigned from the board. Regal also had to balance its contractual obligations of disclosure to a specific investor against its more general obligations of treating all of its investors equally and keeping investors informed of material developments in Regal's business.

"Regal took this obligation seriously and acted quickly to seek further legal advice from senior counsel in relation to its disclosure obligations."

It is understandable that Chan and Lees seriously considered their personal liabilities and opted to resign from Regal given the obligations on directors in relation to product disclosure statements under Section 103F of the Corporations Law.

However, the actions of Chan and Less made an already delicate situation much worse. Their actions raise many questions.

Did their personal interests conflict with the interests of Ascalon? Did their haste in resigning exacerbate the situation? Were investors entitled to be told by Ascalon the reasons for their sudden departures?

One obvious lesson from this is that ASIC should issue guidance to fund managers about the disclosure rules in relation to compulsory civil inquiries into fund manager conduct.

Regal has had to deal with difficult situations before and survived. It suffered the withdrawal of 80 per cent of its funds under management during the financial crisis when hedge funds were on the nose and an easy source of liquidity. At that time the funds under management were $400 million. Many of the clients returned after markets returned to normal.

Aurizon under Microscope

Tim Poole's history as a director points to him putting Aurizon's strategy under the microscope. it also tells you that he thinks there is plenty of growth left in the stock.

That is a good thing as there are investments which fund managers have questioned, particularly the iron ore project in Western Australia.

Poole will oversee succession planning for CEO Lance Hockridge. But that prospect is some way off as he is as vigorously engaged as he has ever been.

Source: George Wang's rescue of BBY part of 'bridge to Asia'