Financial advice firm collapses after being slammed with lawsuits from New South Wales councils
Friday, August 2, 2013/
A financial advisory firm with approximately $3.5 billion in funds under management has collapsed into administration – and is facing lawsuits from three separate local councils in New South Wales.
Oakvale Treasury was placed in administration on July 23, with Ferrier Hodgson appointed. But just weeks earlier, it was slammed with lawsuits from the Tweed, Woollahra and Penrith city councils.
However, it is unknown whether these lawsuits are the main cause of the administration.
The collapse comes just a few months after another financial firm. LM Investment Management, was also placed in administration.
The three councils were contacted by SmartCompany this morning. The Tweed Council informed SmartCompany it and Oakvale are in mediation set to continue throughout August.
The Woollahra and Penrith councils were not available for comment prior to publication. Ferrier Hodgson was also contacted, but no reply was available.
However, The Australian Financial Review has reported the three councils have taken action against Oakvale regarding advice given about investments in collateralised debt obligations.
Collateralised debt obligations (CDOs) were popular investment vehicles during the mid-2000s, and several CDO failures were partly responsible for triggering the financial crisis.
Australian Securities and Investments Commission head Greg Medcraft recently said complex instruments such as CDOs are “difficult to understand” and can cause investor confusion.
It has been reported the three lawsuits are seeking collective damages of more than $10 million.
Oakvale Treasury has operated for more than 20 years in Perth, beginning as an interest rate risk management service. By 1993, the company had 30 clients and $3 billion of exposures under advisory.
Some of its clients include book chain Dymocks, along with several resources companies including Centennial Coal, Mount Gibson Iron. Adelaide Airport and Insurance Australia Group are also listed as clients.
Financial advice firms have had their share of troubles this year. In April, the Australian Financial Services group, which had $6 billion in funds under management, also collapsed.
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