Tomorrow is the second anniversary of the Serious Fraud Office and police raiding the Dunedin office and home of Kloogh, who was subsequently imprisoned for eight years and 10 months after pleading guilty to 11 charges relating to the theft of more than $15million.
The Financial Markets Authority referred the case to the SFO, and a spokesman said the authority still had an active interest in how Kloogh, who admitted he had run a Ponzi scheme for years before he was caught, was not detected earlier.
“We are examining how the broader regulatory regime has worked in relation to matters involving Barry Kloogh," he said.
"We are looking at the roles and responsibilities of other parties and whether they met their obligations.”
The investigation is crucial for out-of-pocket investors, as support for any future litigation might be available if the FMA did find potential breaches of best practice by institutions who handled Kloogh’s transactions.
The FMA’s findings might also bolster the argument of affected investors, who believed Kloogh was investing their money in blue chip stocks and with reputable financial institutions at market rates, for greater scrutiny of financial advisers.
"If there had been a proper audit scheme in place all along, what happened would have been found out," said Geoff Mr Mirkin, a lawyer who is part of a group of professionals acting without fee to help affected clients.
"Investors should not be responsible for that, they should get their money back. They have lost their money because of the system."
The Government recently tightened registration requirements for authorised financial advisers, the type of operator Kloogh was.
Mr Mirkin and the investors believe more stringent safeguards should be in place for the victims of blatant thefts such as those of Kloogh, and something akin to the lawyer’s fidelity fund should be available to compensate blameless customers.
Consumer Affairs Minister David Clark, who has previously held meetings with representatives of the investors, said as part of the recently introduced new financial advice regulatory regime, would-be advisers were required to operate under a licence granted by the FMA.
"This is a new requirement. This means that providers are subject to ongoing monitoring and supervision by the FMA, and the FMA will have a greater range of enforcement tools at its disposal," Dr Clark said.
"Also, breaches of the rules that govern how client money should be handled will be subject to much harsher penalties."
Dr Clark said he was continuing to work with officials to ensure the system regulating financial advisers was fit for purpose.
