Legal advice for action against fund manager

Hi Guys

We have an active complaint with AFCA against a large fund manager, as a result of this we've received an offer of compensation (~$1000). We were going to accept to quickly move on. However they've just added a deed of release that is quite onerous and prevents us bringing any future action against them even if it's related to a separate/future claim. Since this fund manager is very large, and we'll likely own their funds at some stage in the future we can't risk being locked out of legal action if they withhold our money again. Obviously I'd rather not invest with them forever, but some sectors are only covered by them and managed funds become more important as we retire..

Due to the deed of release, it's not worth taking the offer since our loss was much greater. Also it asks us to certify we received legal advice which is probably not worth it for such a small amount, we would have to ask them to increase it.

I'm not sure if we have a real case though, because the loss was not from their unit price change - it was a unit price change in our planned next investment. Instead of the advertised 3 business days to redeem our units from this fund, the fund manager took about 4 weeks (20 business days). This was due only to their own lack of service/lack of staff resources.

During that 4 week period, the entry cost of our next investment increased by over $30,000 above what it would have been had the fund manager redeemed within the 3 days advertised period. We ended up reducing how much we purchased due to the large price increase.

Could a claim be successful for non-performance of redemption and what would the compensation be based on if the original funds unit price didn't change much?

Does anyone have an idea if it's worth pursuing legal action for lack of performance that cost us money, or if there's no chance because the loss was related to a future investment outside of their fund?

Can anyone recommend a lawyer that specialises in compensation within the investment fund realm?

 

So are you looking for compensation for the $30,000?

 

No, I don't have legal experience so I don't know what is realistic. I know I'm limited by the system, so I'd rather ask for advice and just get whatever portion is possible from what we lost.

Also the amount we were planning to buy increased by $30,000 total cost, but after the long delays we only bought 1/3 as much because it was a less attractive allocation given the price had already increased. This might affect our claim as we only have evidence of what we purchased. The only evidence of our original intentions are file notes in our SMSF file which may not be acceptable.

 

So they suggest legal advice and you know you need legal advice. But PC is a substitute ? You know where this is going

Get legal advice. The fund manager likely has a raft of clauses that say redemptions will be processed when they are processed. I have seen redemption requests delayed by up to 9 years (GFC). This can also be caused by liquidity. And they will argue they are "covid impacted" which is likely a defence. Legal advice would address the alleged consequential loss which is a difficult claim...and a high cost to pursue.

 

I think you're out of line suggesting I'm using PC as a substitute.

1. I've asked for a recommended lawyer in my post - specifically to get legal advice. My second post also says I'd rather get advice ("advice" means legal advice).
2. This is a discussion forum - to discuss things. Even if I'm getting legal advice it would still be nice to know of similar experiences. Not just to "keep my lawyer honest" but we're all curious about these things, a curious mind is a good thing.
3. I don't want to pick a random lawyer, if someone has been through this before and their lawyer got glowing reviews from them I'd start there

 

Dan,
From my perspective, it’s not worth seeing a lawyer unless you are chasing a high amount of compensation.
Legal action is never quick, never painless and certainly never cheap.

 

Thanks, usually I'm able to discuss the matter with them over the phone and they can advise what the cost might be and some initial idea of our case (ie if it's worth pursuing), or they can charge me a small fee to do an initial review of the case before going further.

In any case I think I should at least have the initial discussion, since I don't want to sign the deed of release and close the complaint for only ~$1000. Option 2 is to walk away with nothing but a learning experience, or ask for more $ to cover legal advice and update my complaint with information about the deed of release.

 

Ask the otherside to cover your legal advice. A consultation and review of the deed of release is likely to be more than $1000

 

So an offer was made, but then a deed of release was added as a requirement to accept the offer is how I read it. Doesn't exactly sound like it was made in good faith.

In the current climate I would have some doubt you can sign away future rights against unknown events, however I would decline due to the risks it exposes you to & the likely cost of legal advice.

Since it is with AFCA, did they offer an opinion about the offer & amended offer?

What were you originally hoping to get from the complaint, since you've said you'll accept $1000?

 

Yeah exactly, they offered the $1000 as a "good will gesture" and asked if I would accept. Only after acceptance they hit me with the strict deed of release. Declining is what I'm thinking since the deed is written 100% in their favour for now and in the future, and potentially exposes me to future risk - I won't know until I get legal advice.

AFCA's initial position is always for the fund manager to try and work it out with the customer first. I never expected them to give an opinion about the offer - I suppose they will only do that if I reject it and revert back to AFCA.

In terms of what I was hoping for - I'm a realist. I didn't have a preset expectation and was ready to proceed through the process and take whatever comes even if it's not the full amount. No point setting a target if it's not going to happen. To be honest it's not really about the money either, I'm sick of the larger financial companies giving such **** service and messing us around all the time. To hold our money for a month when they advertise 3 day redemptions yeah it ****** me off

 

Thanks Terry, good idea

 

The fund manager is paying you to go away. It will cost them more in AFCA fees if you continue with the complaint.

 

AFCA cant really handle complaints about consequential losses and thats a matter for a court. They often dismiss such claims since the PDS for the fund will disclaim consequential losses due to delays. AFCA have a strict application of deeds & rules like that and cant modify the meaning of the rule if it was in writing. And cant award financial losses above $5400 anyway. It doesnt cost either the complainant or the fund for a AFCA case since AFCA is funded by market participants charged a levy.

I have seen so many people complain about delays to super rollovers etc and these are all treated on the basis of that same rule. The PDS for fund always contains a warning. Nearly every fund manages withdrawals to the 28 days rule. Its rare to be paid "rapidly"

 

I'm not too hopeful of your chances, because the "loss" really had nothing to do with the fund manager did themselves.

Realistically it would open the fund managers to claims left right and centre - anyone could claim they had intended to invest in *that* booming investment in those delayed days

 

Yeah that could be true, I'm not sure if it's user-pays or if their fees are equally distributed?
From what Paul is saying it looks like it's an equally distributed levy?

That's ok if they can't award above $5400, I'm not really worried about the full amount because I suspect I don't have much legal protection in this case. If they paid any amount "to go away" as Peter put it I'd be happy. Currently though the amount they offer is the same as the cost to read the deed and I don't want to be tied to deed obligations for no reason. Paying to 28 days rule is fine if that's what they advertise, but in this case they advertise 3 days (although I'm sure it used to be 1 day if received before 2pm maybe it was changed).

That was my thoughts exactly. If it had been a movement in the initial funds price that cost the money it might be different, but a future separate investment seems shaky I don't really expect to get much. So my complaint is mostly about gross delays. If I get nothing I'm ok with it, at least I've had my complaint heard and handled.