Slater & Gordon is continuing its investigations and legal action against financial advisors who recommended the Basis Yield Fund to investors.
Litigation lawyer Mark Walter said up to 700 Australian investors were estimated to have been affected by the collapse of the Basis Yield Fund in 2007, with the combined loss of capital estimated to exceed $300 million. He said the firm has been contacted by about 100 people so far who had bought units in Basis Funds and that the firm is pursuing a number of financial advisors, from smaller advisory services to large financial institutions on behalf of their former clients.
"Retail investors were amongst the hardest hit by the collapse of the Basis Yield Fund because financial advisors around Australia had been recommending the fund as a product that was safe and suitable for these types of investors," Walter said. "The Basis Yield Fund was being promoted as a product that was a stable, low-risk and fixed-interest investment but in reality it was a high-risk, international hedge fund with exposure to products that were not necessarily suitable for retail investors, retirees and charities."
Walter said the contents of the product disclosure statements issued for the fund should have "raised alarm bells" for financial advisors who were researching the fund with a view to recommending it to their clients.
"The product disclosure statements issued by Basis outlined the high level of risk and the fact that its funds were trading in a number of exotic financial products, including derivatives, collaterised debt obligations and global residential mortgage backed securities," he said.
It is being alleged that the financial advisors have either breached the terms of their retainer with their clients; that they have been negligent and, or engaged in misleading or deceptive conduct in advising their clients; and have contravened consumer protection provisions of the Corporations Act.
Slater & Gordon is pursuing action through various means, including by litigation where necessary. Although the fund collapsed in 2007, Walter said that many investors received advice to invest in the fund much earlier and their rights to bring claims may be expiring. "We encourage all retain investors to obtain legal advice about their position without delay."