Professional Investment Services (PIS) has been forced to set aside a $17.5 million war chest to defend itself against Westpoint claims in a move that has sharply reduced its net profit.
The rapidly expanding advisory and accountancy group returned an after-tax profit of $1.7 million for the 2006/07 financial year.
This was a drop of 84 per cent on the previous year’s net profit of $11 million.
The Westpoint provision was made to cover potential claims against the company for losses incurred by investors.
It was also made as a receivable for the expected insurance recovery of $3.2 million, the company said in the latest financial report filed with ASIC.
“PIS has and will continue to vigorously defend itself against these claims, on the basis that the product was the subject of positive reports from independent researchers at the time the investments were made, and there have been subsequent allegations of fraud on the part of the officers of the company controlling the financial product,” the company said.
The Gold Coast-based group said the Westpoint investments were generally made as part of a client portfolio.
“The directors believe it is unreasonable for PIS to be expected to guarantee one part of a larger portfolio,” it said.
PIS financial planners channelled $21 million of client funds into Westpoint. At the time the group’s total funds under advice were around $12 billion.
“If they have $17.5 million set aside, I dare say that will be to cover the court application as well as FICS [the Financial Industry Complaints Services],” Slater and Gordon lawyer Ben Whitwell, who is representing investors in a class action against PIS, said.
Westpoint collapsed in November 2005 owing $320 million to around 4000 investors.
