The company said it is trying to contact investors who may have been sold any of the LM’s now suspended funds over the past few years, and is encouraging them to get in touch.
As with the Brandeaux student accommodation funds which were suspended in July last year, Regulatory Legal is of the opinion the LM range of funds should not have been sold to many investors, as they were high risk, unregulated collective investment schemes (UCIS) suitable only for professional investors.
Tobias Haynes, a paralegal at Regulatory Legal said: “We are seeing similar patterns with the way UCIS have been promoted by advisers; LM is the most recent brought to our attention.
“Typically investors are told of exaggerated returns, low risks and various guarantees, LM is no exception to this rule. Funds in overseas schemes which are unregulated are high-risk, offer no access to redress for investors through regulatory means and are ultimately difficult to verify or value. Caution should always be taken when entering into such volatile products, and they are a definite no-go for retail clients.”
The first signs of trouble at LMIM came in 2009 when it took the decision to close its First Mortgage Income Fund and to sell down the fund’s assets in order to repay credit.
Problems seemed to be compounded at the end of 2012 when a company called Trilogy wrenched control of the LM Wholesale First Mortgage Income Fund from it.
At the same time, however, the company’s founder and chief executive Peter Drake maintained there was nothing wrong and the group criticised Trilogy's "woeful behaviour". Days after Trilogy’s takeover, Drake said: “LM is a diverse multi-fund manager currently managing nine Australian funds with total assets under management with a realisation value of A$3bn.”
Five months after Drake made this statement, on 18 March 2013, the company filed for administration.
In March this year, International Adviser revealed the huge extent of selling by some firms of the LM range of funds.
According to data obtained by IA, more than 80 advisers each channelled over A$1m of their client’s money into its flagship Managed Performance Fund, which is now in liquidation, but had around A$400m invested at its peak.
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