Financial Adviser & Financial Planner Disputes    

Slater & Gordon regularly acts for clients that have suffered losses as a result of the negligence of financial advisers, including stockbrokers, financial planners, scheme promoters and mortgage brokers.

We have developed a strong expertise in the Corporations Act and ASIC Act, which together regulate financial products and the conduct of financial service providers. With more Australians investing every day (whether in superannuation, managed funds and schemes, property or on the stock market) it is no wonder that more people are seeking professional advice.

The law provides remedies to those investors who suffer losses as a result of acting on negligent or otherwise inappropriate advice (particularly in relation to the risk or security of an investment), or where a financial services provider has failed to provide them with necessary disclosure documentation.

Slater & Gordon is actively involved in law reform, and regularly makes submissions to government bodies, and actively engage with regulators, in order to advocate the extension of consumer safeguards and protections.

Case Studies

The collapse of the Westpoint Group of companies in late 2005 saw 4000 ordinary Australians lose about $350 million. Westpoint was involved in the construction of a number of different residential developments in capital cities across Australia. It funded its construction projects with a combination of “senior debt” from financial institutions and “mezzanine debt”, which it sought to raise from investors.

The Westpoint mezzanine investments were structured in such a way as to avoid the scrutiny of regulators, and to place as much distance as possible between investors and their capital.

Investors initially loaned their money to a Westpoint subsidiary (“mezzanine company”), where it was pooled with the funds of others. This loan was unsecured and was recorded by a “promissory note,” which is little more than an IOU. The mezzanine company on-loaned the pooled funds to the development company, in return for which it received a second ranking security behind the senior lender.

The reason that Westpoint used promissory notes to raise funds from individual investors, is that the Corporations Law states that a promissory note with a face value of greater than $50,000 is not regulated. Ordinarily, Westpoint would have to lodge a prospectus for approval with ASIC before being allowed to raise funds. As it was, they were able to send out a glossy brochure that had the appearance of a prospectus, but lacked vital information about the nature of the investment, the level of risk, and the financial position of the companies involved.

Investors were offered an attractive interest rate of 12% p.a. However, the Westpoint companies did not have any assets aside the development properties. The only money coming into the companies were from a) promissory note investors; and b) people making deposits on the apartments being developed.

As such, it is reasonable to assume that the investors were being paid interest out of the capital being contributed by themselves and others from the outset. Westpoint collapsed as the combined capital became insufficient to cover the interest that had to be paid out.

Westpoint was able to raise such vast amounts of money only through the assistance of financial planners. In return for commissions often in excess of 10%, financial planners would advise their clients to invest their funds in Westpoint promissory notes. In many cases the investments were represented to clients, many of whom were retirees, as being “bricks and mortar” and “safe and secure”.

Slater & Gordon is pursuing claims against financial planners when it can be established that the planner was insured.