Garrisons puts plan together to mop up mortgage scheme mess
Garrisons is considering taking over the loans of clients involved with the Tasmanian solicitor mortgage funds as part of a rescue plan aimed at returning more than $10 million to Garrison’s clients invested in the funds.
Garrisons managing director John Sikkema says the option was being discussed in a meeting between Garrisons and its parent Challenger as Money Management closed for press.
The dealer group was working through its strategies for dealing with the problems and Sikkema says he hopes a solution can be in place in the next couple of weeks.
"Garrisons' key objective from all its actions is to ensure that all affected clients have their investment monies returned," he says.
"We believe it is important to show our clients that we take our commitment to them very seriously and, as managing director of Garrisons, I am personally committed to ensuring that every effort will continue to be given to ensuring our clients' funds are returned."
The company has already instituted a number of actions that include providing financial assistance to clients experiencing financial hardship as a result of these investments. Sikkema says this is about 15 to 20 clients to date.
Garrisons is also leading the legal battle against the Law Society of Tasmania to get clients' capital returned.
Sikkema says the onus clearly rests with the Law Society as the regulator of these funds and the individual firms involved.
"The odds are stacked against individual investors in their fight with the legal fraternity, and Garrisons could assist them in their fight to have their capital returned," he says.
The company has also put in a Freedom of Information request to the Law Society to discover what the lending rules were and how the mortgage funds were regulated.
Figures of $20 million of investors' monies being tied up in these solicitors' schemes were probably on the high side, Sikkema says.
Garrisons advised about $10 million of client's funds be put in these schemes. This advice was provided through one of its Hobart offices and the adviser, Mark John Hudson, was suspended for six months by ASIC last August.
During that period, Hudson could only sell Garrison-approved products and he had to gain a Graduate Diploma in Financial Planning from the Institute of Chartered Accountants.
Sikkema says some of the mortgage funds are in the process of being settled and Garrisons wants to avoid panic selling of properties to avoid clients losing their capital.
"We are working behind-the-scenes to avoid a panic situation with the disposal of the fund's assets," he says.
But Sikkema says the blame for any problems with the mortgages rests squarely with the solicitors concerned, especially where there were problems with valuations on the properties mortgaged.
"The onus of accurate valuations were to be a process of the legal firms' procedures," he says.
"The problem arose because of the financial status of some Tasmanian legal firms and apparent differences between the sworn and current valuation of some of these properties.
"Quite simply, some of the legal firms concerned allegedly did not undertake proper valuations and proper due diligence."
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