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The financial advice sector needs to do more to protect customers against predatory criminals such as Barry Kloogh, Labour commerce spokesman Kris Faafoi says.

In Dunedin campaigning yesterday, Mr Faafoi also said Labour was looking at further law changes to try to prevent a repetition of the Kloogh case.

Barry Kloogh appears in court this morning. Photo: Linda Robertson
Disgraced financial adviser Barry Kloogh. Photo: Linda Robertson

In August, Kloogh was imprisoned for eight years and 10 months on 11 charges relating to the theft of more than $15 million from 81 people in a Ponzi scheme.

Most of Kloogh’s victims were from Otago and Southland.

Widow Karyn Churcher had more than $700,000 stolen from her after Kloogh promised her late husband Chris on his deathbed that the family finances were safe.

After Kloogh’s sentencing, she called on the Government to urgently reform the financial advice sector.

"Where is the protection for us as investors?" she said.

"If nothing else comes out of this, it is time that changed and stuff happened instead of being talked about."

Yesterday, Mr Faafoi said he had sympathy for the plight Ms Churcher and the other Kloogh investors had found themselves in.

"I know there was some disappointment that we weren’t able to move immediately on some of the Ponzi schemes stuff but we have done a consultation and when we get some space we will move on some of the feedback that we got."

However, Mr Faafoi also called on the financial advice sector to do more to protect customers.

Legal advisers for those defrauded by Kloogh have called for greater auditing of authorised financial advisers such as Kloogh, and for a fidelity fund to be set up akin to that lawyers are obliged to pay in to.

"I think they need to take responsibility for their part in making sure that there is surety for their customers in these situations," Mr Faafoi said.

"I think once we get through the transition to the Financial Services Legislation Act that is now ongoing, that is something that the sector should look at."

Mr Faafoi said while the vast majority of financial advisers were honest, there would always be people who would try to work around regulations.

"In those very small number of occasions where there are the likes of Kloogh, the sector should look at what it can do to support people in that situation, when we do get fraud of that kind."

Kloogh has appealed against the length of his sentence, and a hearing is scheduled for December.

Comments

Govt must follow the advice of legal advisors and require financial advisors to be audited the same as solicitors are required to be.

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