Many British nationals have joined a campaign to recoup their life savings after an Australian property fund collapsed last year.
Investors have been told that they are likely to receive no more than 5p for every £1 invested in Queensland-based LM Investment Management (LMIM), particularly with regards to its Managed Performance Fund (MPF).
The MPF, a wholesale product, is an unregistered managed investment scheme, according to Australia’s regulator, the Australia Securities & Investments Commission (ASIC). Because such schemes are not offered to retail investors in Australia, they are not required to be ASIC registered.
However, the MPF was promoted outside of Australia, with assets under management of approximately A$396.6m (£222.3m) at the end of March 2013, when LMIM filed for administration.
LMIM is now in the process of being liquidated and ASIC is investigating what went wrong.
Slater & Gordon, a law firm based in Australia and the UK, is working on a lawsuit on behalf of hundreds of Australian LMIM investors out of its Melbourne office. A spokesman for Slater & Gordon said the firm was “in the process” of organising similar action on behalf of UK and European investors.
A group of approximately 30 financial advisers, located in jurisdictions such as Dubai and Hong Kong - the Advisers’ Committee for Investors (ACI) - is also campaigning on the investors’ behalf as it had many, mostly expat, clients trapped in LMIM when it filed for voluntary administration.
In June, the ACI expressed concerns about the Australian regulator’s failure to act promptly in connection with LMIM. The ACI argued that the regulator should have seen the problems developing at LMIM years before it collapsed, and taken decisive action. Had it done so, the ACI claimed thousands of investors might not be out-of-pocket today.
One investor, who lives near London, said he invested through a life company which, he claims should have paid “closer attention” to LMIM and not have permitted retail investors to invest in the “wholesale” MPF.
The investor put £350,000 into the MPF through a life company bond. He said: “The [life company] knew it was an experienced-investors-only fund, but did nothing to assure itself that I fitted that category.”
He had assumed that the “considerable management charges” he continues to pay quarterly, even though the investment itself is nearly worthless, would have covered due diligence by the life company on the funds offered in its bonds, he said.
One Malaysia-resident Briton, who calls himself “Victor John”, said administrators of qualifying recognised overseas pension schemes, which enabled investors to use UK pension assets to invest in the MPF fund, might also come under scrutiny.
Right to reply
A spokesman for the Australian regulator said the ASIC engaged with LMIM on behalf of investors as early as 2009, in connection with the company’s First Mortgage Income Fund, which was frozen in March 2009.
In October 2012, ASIC “developed concerns about the disclosure being made by LMIM for the [MPF]”, and “raised these concerns with LMIM, leading them to make changes” to their disclosure material.
“In November 2012 we developed further concerns, including the valuation of assets, misleading disclosure and related party transactions.”
However, because the MPF was an unregistered managed investment scheme, ASIC’s mandate for taking further actions was limited.
In March 2013 the regulator began a formal investigation into LMIM, which is ongoing.
