Advice groups still in sights for Basis Capital action

Slater & Gordon (S&G) is ramping up action against advisory groups that recommended that clients invest in Basis Capital.

The national law firm said it is stepping into a litigation phase following extensive research and test cases on the issue.

S&G litigation lawyer Mark Walter said Slater & Gordon was pursing a number of financial advisers, from both smaller advisory practices and the institutions. Advice groups understood to be potential targets of the action include Commonwealth Financial Planning, ANZ Financial Planning, Rabo Financial Advisers, Securitor, Lonsdale Financial Group, The Salisbury Group, Investec and Cantor Wealth Management — among others.

S&G litigation lawyer Mark Walter said individual claims being pursued by the law firm ranged from $500,000 into the millions.

The group will allege that advisers breached the terms of their retainer with their clients, were negligent, engaged in misleading or deceptive conduct or contravened consumer protection provisions of the Corporations Act.

Walter said while the Product Disclosure Statements issued by Basis disclosed high levels of risk and investments in ‘exotic’ financial products, the fund was then promoted by a broad range of advisers as a stable, low-risk and fixed-interest investment.

“How did they all end up recommending it? Either the ratings agencies or the research process are problematic because it keeps reappearing for the same sorts of [risk averse] clients across a broad spectrum of advisers,” Walter said.

“I think that’s an issue that will get flushed out in litigation in due course.”

Walter said many investors were “probably unaware that they have actually been [invested] in Basis”, with losses disguised among others made through multi-manager funds.

Many investors “haven’t deconstructed how the losses came about and whether the recommendations that put them in the investments were appropriate in the first place”, Walter said.

S&G had been contacted by about 100 investors in the Basis Capital funds, but was urging for others to come forward before the six-year statute of limitations came into play. Much of the advice given to invest in Basis Capital was issued in 2005-06.

The group has the backing of an unnamed Australian litigation funder for individual claims against advisers.