A Senate committee investigating the Sterling Income Trust and its 2019 collapse questioned the Australian Securities and Investments Commission as to how it took nine months to start formally investigating the fund after being made aware of a "defective" product disclosure statement.
Nearly $30 million was invested in the scheme between 2012 and 2019, including $4.9 million after ASIC issued a stop order in August 2017 citing factors including not disclosing risks, and conflicts of interest in a PDS.
Sterling targeted elderly investors who would sign long-term tenancy agreements and use returns from a lump-sum investment to pay rent.
ASIC chair Joseph Longo told the committee "we can't be everywhere at once" and pointed out around 3600 other schemes were being investigated at the time.
He added the stop order had been publicised through a media release, informing potential investors of Sterling's conduct.
"I'm not here to make excuses for any missteps ... merely trying to provide you with some perspective," he said.
But referencing ASIC's 2017 concerns prompting the stop order, Liberal senator Paul Scarr was unconvinced the scheme should have been allowed to continue operating.
"They didn't have the capacity to be doing it, or they weren't interested in doing it - they just wanted to get the money in and get the product out," he said.
Earlier, the inquiry heard from Annabelle Crowther, whose father lost $171,000 in the investment.
She said it was "utterly disgraceful" ASIC initially permitted the scheme when a director had registered more than 100 businesses using different variants of his name and birth date.
"To allow a person who has had prior history of a retirement fund collapse (to be) able (to) set up again without a strong regulatory body is asking for trouble and that's exactly what has happened here," she said.
Ms Crowther, a former Sterling sales representative, said it marketed its New Life Lease scheme through community newspapers, radio and by putting leaflets in mailboxes, while it also approached organisations such as bowls clubs to do presentations.
Her written submissions say Raymond Jones, the director involved with more than 100 companies, once told her "ripping off and stealing from seniors is a crime … worse than murder".
The inquiry also heard a compensation plan before parliament designed to protect financial misconduct victims would not be suitable for many of Sterling's victims, as it did not cover managed investment schemes.
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