This article is from the Australian Property Journal archive
CLASS action lawyers Piper Alderman are urging investors in the failed LM Investment Management to act quickly following the appointment of administrators.
Senior associate Shaan Palmer told Property Review, unit holders in any of the funds management by LM should get in touch with the firm because their rights may be affected following the appointment of FTI Consulting earlier this week.
“We have been assisting unit holders in relation to the ongoing demise of the LM First Mortgage Fund including in respect of a class action. We presently act for a major portion of the unit holders by value.
“We are presently investigating claims against the responsible entity of the fund, LM Investment Management Limited, its directors and other third parties associated with the fund’s demise with a view to bringing a class action (or any other appropriate action).
“Those actions will seek to recover the losses sustained by unit holders, many of whom are elderly persons who invested their life savings,” Palmer said.
The $3 billion LM Investment Management called in administrators earlier this week following revelations that the corporate regulator was investigating the company.
As previously reported by Property Review, ASIC was looking into LM Investment Management’s claims that it was “bank-like safe” and that it was double regulated, as a fund manager and a “conservative and highly-rated private bank”.
At the same time, LM rejected comparisons that it was operating a Ponzi Scheme, despite confirming to Property Review that income from new investors is being used to repay returns to existing investors in the Managed Performance Fund.
The fund owns one asset, the 800-lot Maddison estate master planned community. Although the estate has not recorded a single land sale.
Up until the appointment of administrators on Tuesday, LM was still seeking new investors. According to Fairfax, LM was spruiking financial planners to bring in new clients with $1 million by giving the planners an upfront commission of $100,000 plus an ongoing fee of 4.4% in the first year; then a 3.3% ongoing trailing commission.
Lawyers Slater & Gordon partner Mark Walter said their firm is looking to launch a legal action against a number of financial planners recommended financial products of LM.
Walter told Property Review that Slater & Gordon were preparing at least eight separate actions against financial planners who advised ‘mums and dads’ investors and self funded retirees to invest in LM’s various financial products.
“The investors we are representing have very good claims. We are looking at a number of areas where they have been ill-advised to invest in LM including the timing of investment advice, the degree of risk profile, disclosure statements and the suitability for LM’s products for those individual investors needs.
“LM going into administration confirms our concerns in relation to LM and the inappropriate advice to a large number of investors by financial planners,” Walter said.
The appointment of administrators comes only a month after LM sought to assure thousands of investors in its frozen funds that it was taking “critical steps to provide further comfort to closed fund investors”.
CEO and chairman Peter Drake said “We have conducted a thorough review of all aspects of the closed fund and its operations, and we’ve listened very, very closely to the wishes of our investors.
“We want to see investors’ investment capital returned as quickly as commercially possible and estimate that this program will take two to three years to complete,” Drake told investors in February.
The extent of how much investors have lost following the appointment has not being quantified. LM claims it has $3 billion of assets under management in nine funds and at least three funds are frozen.
It is likely that the investors will line up behind the financiers and the number of companies owned by Drake. In just one fund, the Managed Performance Fund, has a small mortgage to Suncorp and second large mortgage to companies controlled by Drake, which makes up 62.5% of the assets of the fund. The debt has been growing as unpaid interest is added to the debt and now stands at more than $240 million.
Drake has similar arrangements with the other funds, where several of his companies are in front of the queue.
Property Review
