A Gold Coast-based funds management firm claiming to manage billions of dollars in assets has collapsed during a horror month, after an investigation aired by ABC’s Four Corners accused the business of potential breaches of corporations law.
LM Investment Management is already reportedly being investigated by the Australian Securities and Investments Commission.
Last week LM Investment Management was placed in administration and John Park and Ginette Muller from FTI Consulting were appointed as administrators. The business operates in dozens of countries and claims to manage billions across different funds.
LMIM made a statement on its website saying “the board of LM Investment Management Ltd (Administrator Appointed) (LMIM, the company) advises that after full consideration of its obligations as a company and its duties to ensure it acts in the best interests of investors in the LM Funds, it is placing the Responsible Entity, LMIM, into voluntary administration”.
FTI Consulting was contacted by SmartCompany, but no further information could be provided.
In a letter to investors published on the LMIM website, it says arrangements are in place for staff to continue working to manage the fund assets with the oversight of the administrators.The company has approximately 130 staff.
All the LM Funds are closed to new investors and all transactions have been suspended while the administrators review the funds.
While the administrators scrutinise the fund manager, lawyers from Piper Alderman and Slater and Gordon are conducting their own investigations into the firm.
On Wednesday last week, Piper Alderman confirmed it is planning to launch a class action against LMIM and its executive director Peter Drake.
Partner Amanda Banton said she will investigate, “claims against the responsible entity of the Fund, LM Investment Management Limited, its directors and other third parties… with a view to bring a class action”.
“Those actions will seek to recover the losses sustained by unit holders, many of whom are elderly persons who invested their life savings,” a spokesperson for Piper Alderman said.
The investigation by Four Corners alleged elderly retirees and near retirees who invested in retail have had their investments in LMIM’s First Mortgage Income Fund written down and their remaining money frozen in funds for more than four years.
Four Corners claimed the funds manager made claims one of its key funds is a “bank-like” facility, and that it continues to work as a “conservative and highly rated private bank”.
In a defence to Four Corners, LM Investment said “material we circulated to a small group of some 40 financial advisors only contained a reference to “bank-like”.
“The confusion regarding context was identified almost immediately and it was removed from circulation with an amended document forwarded to those who received the first, to eliminate any possibility that reference may be taken out of the context originally intended.”
In a separate case, Slater and Gordon is urging investors to come forward who were subject to dodgy financial advice by advisors who allegedly directed “tens of millions of dollars of investors’ funds into the high risk Gold Coast-based mortgage fund”, according to a statement from the firm.
Slater and Gordon commercial litigation lawyer Mark Walter has already issued legal proceedings against a number of financial advisors and planners on behalf of investors who have lost millions of dollars from the mortgage fund.
“The people we are talking about are typically risk averse and conservative and they have put their funds into this high-risk mortgage fund because their financial advisor told them to, although it was debatable as to whether the fund was appropriate for them,” he said in a statement.
“In our experience, very few people have any sense that their losses may be recoverable until they seek advice and for many of the people who have found themselves in this unfortunate situation, it will soon be too late to enter the recovery process.”
Walter is concerned investors will soon be unable to recover their money as by law they generally have six years to lodge a claim against a financial advisor before the right to sue expires.
ASIC was contacted by SmartCompany this morning, but a reply was not available prior to publication.