Westpoint investors trying to recover lost savings through the Financial Industry Complaints Service (FICS) may be locked out of joining taxpayer-funded litigation because of a legal loophole.
ASIC announced on November 8 that it intends to file lawsuits against five dealer groups and Westpoint directors to seek compensation for 3650 investors for the collapsed property lender.
However, if the regulator commences civil proceedings on behalf of an investor, a serious conflict could be created with the claims that are before FICS, financial services lawyer Mark Halsey said.
FICS rule 14 prohibits a complainant from continuing legal action while the external dispute resolution scheme is dealing with their complaint.
To date FICS has received 399 written Westpoint complaints and 551 phone enquiries.
Halsey said that under section 50 of the ASIC Act 2001, in order for the regulator to commence actions on behalf of an individual, he or she must give ASIC written consent to commence the action in their name.
“The financial services industry may have entered unchartered waters in this regard and all parties need to seriously consider their positions,” Halsey said.
“It is, however, clear that there should not be simultaneous civil proceedings by ASIC on behalf of individual investors as well as the concurrent hearing of a FICS complaint in relation to the same issues.”
ASIC intends to sue Dukes Financial Services, Bongiorno Financial Advisers, Glenhurst, Masu Financial Management and Professional Investment Services (PIS), who employed financial planners that channelled clients into Westpoint.
ASIC is seeking damages for 729 clients from those licensees who have potential claims against them of $63.2 million.
So far FICS has resolved 46 complaints and 26 have been finalised by a panel or adjudicator decision. A further 76 cases are under investigation and 84 are awaiting a decision.
Halsey, who has represented some dealer groups with Westpoint claims, said FICS should cease the complaints process immediately and no further FICS fees should be incurred by those licensees who are affected.
An ASIC spokesman said the regulator is in discussions with FICS as to the impact of its proposed proceedings on complaints currently lodged with FICS.
“Given ASIC’s proceedings are yet to commence, ASIC does not consider that the FICS complaints process is currently affected,” the spokesman said.
FICS chief executive Alison Maynard said 40 current complaints could be affected and those people will be contacted.
“Because the proceedings have not commenced, and we don’t know any of the details, it is complaints as usual and we’ll continue to deal with the complaints we’re getting,” she said.
