LM funds facing class action by unitholders
Piper Alderman partner Amanda Banton confirmed on Monday that the firm had been contacted by a number of concerned unitholders.
"Piper Alderman is presently investigating the conduct of LM in respect of the LM First Mortgage Income Fund to determine whether to commence proceedings against the fund's responsible entity, LM Investment Management Ltd, or any other parties in respect of the demise of that fund," she said.
Ms Banton has acted for unitholders in Equititrust's funds and for the liquidator in Elderslie Finance.
As reported by the ABC's Four Corners on Monday, the Australian Securities and Investments Commission is investigating LM for potentially false and misleading statements.
The Gold Coast fund manager LM Investment, which operates in 70 countries and says it manages $3 billion of realisable assets, has even claimed that one of its key funds is a "bank-like" facility and that it operates in Australia as a "conservative and highly-rated private bank".
At least three of LM's funds are frozen, hundreds of millions of dollars have been lost and many unitholders cannot access what is left of their savings. LM denies that it has misled investors.
Late last year, its founder, Mr Drake, brought legal proceedings against Fairfax Media for defamation over a story criticising his management of the funds. He has also claimed that he has the author of this article "under investigation".
Property funds management group Trilogy Capital is seeking to remove LM as the manager of its flagship fund, the frozen LM First Mortgage Income Fund.
In marketing to clients to defend against the incursion by Trilogy, LM has ratcheted up its fees for the funds that are still open, such as the Managed Performance Fund.
Sources said that some financial advisers had been offered about 10 per cent cash in commissions, in the first year, to pt their clients' savings into an LM fund.
Neither LM nor Mr Drake were available for comment.
Frequently Asked Questions about this Article…
The class action is being explored by a number of disgruntled unitholders of LM Investment Management funds, with law firm Piper Alderman (partner Amanda Banton) investigating whether to commence proceedings over the demise of the LM First Mortgage Income Fund. The action would target the fund's responsible entity, LM Investment Management Ltd, or other parties connected to the fund.
Scrutiny followed reporting by ABC's Four Corners and concerns from unitholders. The Australian Securities and Investments Commission (ASIC) is investigating LM for potentially false and misleading statements, while Piper Alderman is investigating possible civil proceedings on behalf of unitholders.
According to the article, at least three of LM's funds are currently frozen. It also reports that hundreds of millions of dollars have been lost and many unitholders cannot access what remains of their savings.
The article says LM claimed its operations spanned 70 countries, managed about $3 billion of realisable assets, and described one key fund as a "bank-like" facility and itself as a "conservative and highly-rated private bank." ASIC is investigating whether any of those statements were potentially false or misleading.
LM has denied that it misled investors. The company's founder, Peter Drake, has taken legal action against Fairfax Media for defamation over critical reporting and has said the author of the article is "under investigation." The article also notes that neither LM nor Mr Drake were available for comment.
Property funds manager Trilogy Capital is seeking to remove LM as the manager of the frozen LM First Mortgage Income Fund, positioning itself as an intervener in the management dispute over the flagship fund.
The article reports sources saying some financial advisers were offered about 10% cash commissions in the first year to direct clients' savings into an LM fund. It also notes LM increased fees for funds that remain open, such as the Managed Performance Fund, reportedly as part of defensive marketing.
Investors concerned about holdings in LM funds should monitor official updates (including ASIC and any court actions), consider seeking independent legal and financial advice, and contact their fund or adviser for the latest information on access to funds and next steps.
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