“You need to view our experiences with the image of an insolvency vice consisting of a sluggish regulator on the one hand, and rapacious insolvency practitioners on the other hand,” said Neil Robbirt a member of the Adviser Committee of Investors (ACI) based in Thailand.
“The net effect is a cycle of desperation for investors as they see their money flow from LM bank accounts into the hands of people who seem to do little other than raising invoices,” he said.
The ACI is a group of IFAs who were involved in marketing the failed LMIM range of nine funds, most of which were invested either directly or indirectly in the Australian property market.
Robbirt has calculated that the publicly available fee claims from the three court-appointed insolvency practitioners in LMIM – BDO, KordaMentha and FTI Consulting – show the bill currently stands at around A$11.5m (£5.3m, $8.0m).
“This is a whopping A$11.5m of monies taken from investors for the purpose of… well we don’t know because there has been no achievement to date,” Robbirt said.
“The courts appointed separate insolvency practitioners for each fund citing conflict of interest. This is a simplistic and naïve solution and has created the situation we now face with the various insolvency practitioners making claims and counter claims in court on behalf of the funds they now handle and racking up more fees,” he said.
LM Investment Management was a diverse multi-fund manager which filed for administration in a Queensland court in early 2013 causing losses to an estimated 12,000 expat investors, mainly from Britain and Australia. Most of the affected investors claimed they were coaxed to invest in LMIM by unregulated financial advisers.
According to data subsequently obtained by International Adviser, more than 80 advisers each channelled over A$1m of their client’s money into LM’s flagship Managed Performance Fund (MPF). The data showed 13 advisers invested more than A$5m of their clients’ money into the MPF, with some investing up to A$13m or A$15m.
The ACI maintains that problems were first spotted in the LM funds in 2009 by Adrian Page of Financial Page International in China who registered a complaint about LMIM in May that year.
“Page might well have been sharper than most LM distributors in sensing something rotten on the LM front, but it is the 47-month gap to LMs “voluntary liquidation”; and a further 21-month gap before ASIC took any action against LM directors which causes concern,” the ACI said.
“There are not that many regulators in the world that would be so slow,” suggests Peter Kende, a Hong Kong-based member of the ACI.
Slow political response
ACI chairman Simon Litster drew a comparison with bankruptcy procedures in the US where under Chapters 7 and 11 Law, one insolvency practitioner provides an umbrella facility for the overall process in order to protect the investors who are the ultimate victims.
Lister is also frustrated at lack of a response from Australian politicians.
“Every attempt made to get the Australian senate to launch a full investigation into the LM collapse just gets referred back to ASIC (the regulator) and the insolvency practitioners, we see the former as part of the problem and the latter as part of a flawed system,” he said.
In July this year Thailand-based expat investors who lost out from the collapse of LM Investment Management persuaded the Australian ambassador to Thailand to represent their case to the Australian Government.