An Asia-based group of expat investors who lost their savings in the 2013 collapse of LM Investment Management, an Australian fund management group, has announced plans to seek redress through the UK courts.
The LM Investor Victim Centre (LMIVC), as the group calls itself, said it is working with Harcus Sinclair, a London Law firm, and Capital Interchange, a litigation funding broker, to “examine opportunities for bringing actions” in England and Wales, and “potentially other jurisdictions”.
The LMIVC estimates that as many as 10% to 15% of those who lost money in LMIM investment funds may live in the UK, or be British nationals.
For this reason, it is trying to spread the word of its efforts to other LMIM victims to get in touch, and especially, to fill out a questionnaire on its website. “LMIM investors must respond quickly… to minimise the effects of time statute limitations,” the LMIVC said, in a statement announcing its campaign.
It said its efforts are being helped by KordaMentha, the Australian court-appointed trustee in the matter, which has provided it with useful information.
An LMIVC spokesperson said the statute of limitations is believed to be six years from the date an investment was made, meaning that, particularly for those who put money into an LMIM product in 2010 or 2011, “time is of the essence”.
As reported, LM Investment Management (LMIM) was a Gold Coast, Queensland-based asset manager regulated by the Australian Securities & Investments Commission (ASIC). At one point in 2012, LMIM marketing materials claimed the company had “realisable assets under management” of around A$3bn (US$2.25bn, £1.7bn).
It filed for administration at the end of March, 2013, at which point its popular Managed Performance Fund (MPF) was reported to hold assets under management of approximately A$400m.
Many of the investors in that particular LMIM fund were British and Australian expatriates living in Asia, especially Thailand, Malaysia and Hong Kong, where English-speaking, expat-focused advisers are understood to have promoted it aggressively because it rewarded them with high commissions. (LMIM founder Peter Drake has said IFA commissions on the MPF were no more than 3%.)
The MPF was also sold to expats living in the United Arab Emirates, Northern Cyprus, Turkey, South Africa and Spain, as well as in both North and South America. Just before LMIM went into administration, it opened an office in London, and obtained authorisation from the Financial Services Authority and for a brief time, was authorised by the FSA’s successor, the Financial Conduct Authority, a fact which could prove important for investors not just in the UK but elsewhere in Europe.
The LMIVC group claims to have more than 770 members, who together lost more than A$68m in the LMIM collapse.
An unknown number of expat LMIM investors have returned to the UK since the company’s demise, so at this point the exact number who currently live there isn’t known. However, an LMIVC spokesperson said initial results of a poll currently under way suggests that as many as 70% of the investors in the MPF “are of British nationality”, wherever they happen to be living at the moment.
After the company filed for administration, investors in the MPF fund were told that they were likely to receive no more than 5p for every £1 they had invested.
In addition to seeking to recoup their lost investments by going after the advisers who recommended the fund – which they say had not been intended for retail investors outside of Australia – the LMIVC group’s members have sought to put pressure on government regulators and other “investment gate-keepers”, such as portfolio bond providers, who, they say, should not have allowed them to invest in the MPF, particularly after problems began to appear, some claim, as early as 2009.
A January 2011 LMIM document, a copy of which International Investment has seen, lists 18 platforms and bond providers which allowed investors to access the LM MPF fund through their facilities, including a number of well-known British and European insurers and investment specialists.
Thus far, they say, ASIC and the entities it appointed to wind up LMIM have failed to return to them any of their lost savings.
In its most recent statement, the LMIVC also says its members “have yet to receive indication of support or participation from any of the nineteen known bond providers that invested clients monies in the MPF”.
The LMIVC’s efforts to take action in the UK comes a little less than two years after a previous attempt to do much the same thing was launched by another group of out-of-pocket LMIM investors, some of whom are part of the latest attempt. In the earlier effort, the investors said they were engaging Slater & Gordon, a law firm with a presence in both Australia and the UK, which was already working on a lawsuit on behalf of hundreds of Australian LMIM investors out of its Melbourne office.
An LMIVC spokesperson said the previous effort hadn’t worked and the investors had walked away from it.
ASIC ‘still working’
The Australian regulator, ASIC, has been heavily criticised by many LMIM investors, who have said it should have protected them better, and been aware earlier of the company’s problems. Some of the advisers who sold the firm’s funds have also been critical. But it insists it is still working to obtain redress for them.
On its website, ASIC says it “has been and will continue to liaise with the external administrators” of LMIM as well as to “monitor the current status of the managed investment schemes LM operated”.
It notes that it successfully saw to it that the Queensland authorities confiscated the passport of LMIM’s founder, Peter Drake, and froze his assets, and that, in November 2014, it started a civil legal action against him as well as the company’s other former directors. (Some LMIM investors have complained that no criminal charges were filed.) These actions are ongoing, according to ASIC.
“Consistent with our policy in relation to investigations, we are not at this stage in a position to comment further publicly,” the regulator’s statement concludes.
“We will provide updates on our website on matters affecting investors as public information becomes available.”