Australian regulator moves against failed fund house LM
Regulator to seek fines and bans on executives after collapse of property fund robs thousands of investors in HK and elsewhere of their savings
Australia's securities regulator announced yesterday it is taking legal action seeking fines and disbarment orders against directors of an A$800m (HK$5.3 billion) property fund whose collapse in March last year spelt financial ruin for thousands of Australian and expatriate investors around the world, including Hong Kong.
Directors of Gold Coast-based LM Investment Management, including founder Peter Drake, are accused of "failing to act with the proper degree of care and diligence" regarding transactions in the A$400m Managed Performance fund, the Australian Securities and Investment Commission (ASIC) said in a press release.
According to the announcement, ASIC is commencing civil penalty proceedings in the Federal Court of Australia against Drake and fellow LM directors Francene Mulder, Eghard van der Hoven, Simon Tickner, and Lisa Darcy, in relation to loans made by the fund to a Drake-controlled development called Maddison Estate.
"These allegations are flimsy at best and in some instances, totally misleading and incorrect," and LM directors "will vigorously defend these allegations", Drake said in response to the ASIC announcement.
The fund was LM's flagship product and was heavily marketed overseas as a low-risk, stable-return vehicle ideal for people planning a retirement. Investors interviewed for an earlier Post Magazine investigation into LM said they were neither told the fund was unlicensed nor that redemption request delays had begun as early as 2009. The fund is now valued at 5 Australian cents on the dollar by administrators.
Between 2008 and 2012, Maddison's loan limit was increased from A$40m to A$280m and loans from the fund were approved by LM directors "in the absence of independent valuations or feasibility studies", according to ASIC. The site at Maddison in Queensland remains undeveloped.