A former client of Professional Investment Services (PIS) is seeking compensation over claims she received advice that was misleading and/or deceptive.
Marcia Edwards lodged a claim against the dealer group and one of its authorised representatives in the Victorian registry of the Federal Court on 21 December 2009.
Edwards claims the advice she received between May 2005 and March 2007 was not based on reasonable grounds, did not exercise due care and skill and was not safe to be relied upon.
Edwards sought the advice of PIS and the adviser in May 2005 after wishing to invest an inheritance of $2 million, her statement of advice (SOA) said.
In May 2005, Edwards claims PIS provided her with an SOA that advised her to invest the $2 million in HFA Octane Series 2. She agreed.
In May 2006, Edwards informed PIS she had followed the advice and stated she was not a sophisticated investor and worked as a police officer earning $37,000 per year.
At the time she had equity of $500,000 in a home, a motor vehicle worth $110,000, a loan of $80,000 on a car and $100,000 in superannuation.
PIS then conducted a risk profile, classifying the client as a "balanced investor type," court documents said.
Edwards was then provided with a second SOA that advised her to borrow $2 million, which included a 0.25 per cent put option fee, to invest in the HFA Octane Asia Fund.
She was advised to borrow the amount from UBS at an interest rate of 8.6 per cent, with the first year's interest to be paid entirely from personal savings, court documents said.
In June 2006, Edwards claims the second SOA changed, with the amount she was due to borrow and invest reduced from $2 million to $1.5 million, documents said.
She borrowed $1.5 million from UBS in order to invest in the HFA Octane Asia Fund, which left Edwards obliged to pay $126,750 annually in advice plus $3750 for the put option.
In March 2007, Edwards informed PIS that her circumstances had changed, as she was now working part-time and earning $27,000 gross per annum, documents said.
After becoming uncomfortable with the level of debt, Edwards asked PIS to redeem the units she had in the HFA Octane Asia Fund and repay the first UBS loan.
She claims PIS did not obey her request.
