The legal action was begun in 2014 by the Australian Securities & Investments Commission (ASIC) which sought financial penalties and banning orders against LMIM’s founder Peter Drake and its former directors Francene Mulder, Eghard van der Hoven, Simon Tickner and Lisa Darcy after the fund collapsed owing millions of dollars to investors worldwide.
The trial only commenced on 29 August this year but last week ASIC said that it was discontinuing one of the two actions it had taken against the firm, which meant two of the directors, Tickner and Darcy, no longer face any court action.
A second claim involving Drake, Mulder and van der Hoven concerning their decision as directors of LMIM to sign off on a series of large loans to Maddison Estate, which was owned and controlled by Drake, is still proceeding.
ASIC did not give any reason for declining to take action against Tickner and Darcy.
Property development
Maddison Estate was the development company behind what was once touted as a A$1bn (£600m, $760m) real estate development in the northern suburbs of the Gold Coast on the Queensland coast near the state capital of Brisbane.
The ASIC court action involving Tickner and Darcy focused on their conduct in signing off on A$180m of loans to Maddison Estate in 2011, while the ongoing case centres around a series of loans amounting to A$280m made in 2012.
ASIC had alleged at the start of the criminal action that Drake had used his position at LMIM to gain an advantage for himself and that the other former directors had breached their duties by failing to act with proper care and diligence regarding transactions involving the A$400m LM Managed Performance fund (MPF).
ASIC commissioner Greg Tanzer said: “Investors should be able to have confidence that the people responsible for managing their investments act appropriately, take a diligent and intelligent interest in the affairs of the company, and apply an enquiring mind to the responsibilities placed upon them.”
The maximum fine in Australia for a director breaching their duties is A$200,000 for each contravention. As well as fines, ASIC is also seeking to disqualify Drake and the former directors from managing companies and providing financial services.
Global focus
The fallout from the collapse of LMIM in 2013 has been truly worldwide affecting many expat investors, particularly in Thailand, the UK and the Middle East.
According to one investor action group, the LM Investor Victim Centre (LMIVC), LMIM owes 12,000 investors around the world a total of A$750m.
LMIVC said in July this year it was working with Greg Fairley of Capital Interchange and London Law firm Harcus Sinclair to examine opportunities to bring actions against LMIM in England and Wales, as well as other jurisdictions.
Representatives of another action group, LM Thailand Investor Group (LMTIG), persuaded the Australian ambassador to Thailand to represent their case to the Australian government in July 2015. In October of last year, LMTIG also secured support from the British embassy in Thailand, which had previously said the UK was unable to intervene because LM was based in Australia.
In September 2015, a group of Thailand-based IFAs involved in marketing LMIM’s range of nine funds, called the Adviser Committee of Investors (ACI), strongly criticised the rising bills from insolvency practitioners and the slow pace of Australian regulators in dealing with the case.
