The collapse of Managed Investments Schemes such as Great Southern and Timbercorp calls into question the role of Accountants and Financial Planners who introduced or recommended these products to their clients.
An Accountant or Financial Advisor is in a special position of responsibility to their clients to act competently in relation to all aspects of work for which they are engaged. They are required to exercise the reasonable care and skill expected of a competent Accountant or Financial Advisor.
Failure to achieve the required standard of care will expose the Accountant or Financial Advisor to an action both in contract and in tort (ie. negligence) for damages in respect of any losses suffered by their clients. Actions may also arise under the Trade Practices Act in respect of any misrepresentation.
It is arguable that an Accountant or Financial Advisor who introduces a client to a Managed Investment Scheme is either directly or by implication endorsing the Scheme as a worthwhile investment.
It has recently become evident, however, that many of the Schemes never had any realistic prospect of achieving anywhere near the Prospectus returns and that many Accountants and Financial Advisor simply failed to undertake any forensic analysis of the products. These same Accountants and Financial Advisor, however, were nonetheless prepared to accept very large Commissions to introduce these products to their clients.
The evidence of reputable financial experts strongly favours a conclusion that reasonably competent Accountants and Financial Advisors would not have been persuaded that the Prospectus information was accurate and would have advised their clients that the probable rates of return were so low as to not be worthwhile considering.
Investors would be horrified to learn of the evidence given by a West Australian farmer to a Senate Select Committee in Perth on 1 July 2009. This farmer gave detailed evidence that when he declined to sell his property to Timbercorp representatives for the purposes of growing avocados, the representatives proceeded to buy a vast area of land nearby which was recognised locally as being completely unsuitable for the growing of avocados!
This evidence emphasises the emerging reality that many Managed Investment Schemes were no more than tax-driven schemes existing largely for the benefit of the Scheme Operators and the Accountants and Financial Advisors, who have regarded commission income as a lucrative entitlement, with little or no regard to the long term rights of the grower investors.
Edwards Michael Powell has a team of dedicated and highly experienced Professional Negligence lawyers who are now accepting instructions to act on behalf of grower investors who have suffered financial loss as a result of the failure of their Accountants or Financial Advisors to protect their interests.