Perth charity takes legal action over bad advice and investment loss
Posted on 19 Sep. 2011
One of Western Australia’s leading charities, Senses Foundation, is taking legal action against a financial advisory company after losing more than 1.5 million dollars in Basis Capital Funds; a fund linked to the US sub-prime market.
Law firm Slater and Gordon has filed a Federal Court application on behalf of the charity against investment company, Counterpoint, regarding the advice provided by its former director, Peter Williamson. The claims allege the company failed in its duty of care and engaged in misleading and deceptive conduct between 2005 and 2007 while advising Senses.
Slater and Gordon Commercial Litigation Practice Group Leader, Mark Walter says the charity, which provides vital support to a wide range of people with disabilities and unique specialist services to clients who are deafblind, relied on Counterpoint's professional advice.
“Senses Foundation trusted Counterpoint to invest the money safely and wisely so that the charity could continue to meet its future operating costs and the needs of its clients.
“However a recommendation was made that saw the charity investing its money into Basis Capital Funds that was linked to the US sub-prime debt market and the fund later collapsed.”
“In recent years we have successfully represented people in claims against their financial advisors where they recommended investing in Basis.”
“Senses Foundation would never have placed the money with Counterpoint if it had been told that its investment in Basis Capital Funds was high risk and volatile. It wasn't informed of that and as a result, it suffered significant losses,” he said.
“Counterpoint ought to have known that this was a completely unsuitable, high risk proposal for a charity, and that the money should have been invested in a more appropriate manner, “said Mr Walter.
Mr Walter said it was not until Senses received a letter two years later, advising that Basis Capital Funds had collapsed, that it realised its had invested in a high risk fund.
Senses chief executive officer Debbie Karasinski said it was devastating for the organisation.
“We were clear in our instructions to the adviser that Senses funds were to be managed with the aim of providing a secure income stream to the Senses Foundation and to avoid high risk for high return investments.”
“Clearly the advice we received, and accepted at the time, was linked to an investment that was outside the parameters of our clearly enunciated investment strategy,” said Ms Karasinski.
Senses Foundation lost about $1.5 million dollars.
Mr Walter said this is an important case that could not proceed without the support of LCM Litigation Fund (LCM) financially backing the legal action.
“The decision to litigate is not made lightly, but our clients and LCM believe Counterpoint has a case to answer,” he said.
LCM has been providing funding litigation since 1998. It has a strong track record of funding successful claims that have generated significant recoveries for its clients, and have funded a number of claims against advisors in relation to investments in Basis Capital Funds.
We're here to help. Make an enquiry now.
If you have a question, want some more information or would just like to speak to someone, make an enquiry now and we’ll be in touch with you as soon as possible.