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Wickham Securities goes under

More than 300 self-funded retirees are at risk of losing their investments, after Brisbane-based Wickham Securities appointed administrators.

According to the Australian Financial Review (AFR), up to $30 million in investments are at risk, if administrators are unable to recover loans made to the high-risk property and development industry.

Wickham raised the funds by way of a public prospectus, and issued notes through Bendigo and Adelaide Bank’s (ASX: BEN) Sandhurst Trustees. Administrator Gary Sparks has told the AFR that many of the investors were super funds.

Wickham Securities is a mortgage finance lender, providing funds for borrowers buying or refinancing commercial property. That’s a similar business model to Victorian based Banksia Securities, which collapsed in October 2012, owing 16,000 investors $650 million, and comes on the back of several high profile non-bank collapses in the financial services industry in recent years, including Storm Financial, Opes Prime and MFS.

The AFR reports that the Australian Securities and Investments Commission (ASIC) has asked the court to freeze the assets of the financial planner behind the collapse, alleging that he misled investors, made false representations and failed to disclose material information.

ASIC has launched court action against Brad Sherwin, his wife and brother-in-law Peter Siemons, including a series of related companies involved in the collapse.

Last year, ASIC launched a task force to examine the $4.5 billion unlisted debenture sector, following the collapse of Banksia, while the government has proposed minimum capital and liquidity standards, but these are yet to be introduced.

Foolish takeaway

The moral of the story is that if it sounds too good to be true, then it’s probably not a sustainable business. Companies promising returns of up to 10%, especially those within the property sector, should be viewed as extremely high risk, and best avoided.

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Motley Fool writer/analyst Mike King doesn’t own shares in any companies mentioned. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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