The Federal Court of Australia has approved the settlement of a compensation claim to clients who were advised by Professional Investment Services to invest in the failed Westpoint Group.
Under the settlement, PIS must pay eligible investors AUD5.9m.
The court approved a distribution mechanism whereby the settlement sum will be distributed equally to group members based upon the total capital that they had invested. This will result in group members receiving 62.5 per cent of the capital they invested.
On 7 September 2009, the Australian Securities and Investments Commission filed an application with the Federal Court in Brisbane seeking final determination of the identity of group members to whom compensation will be distributed and seeking approval for it to communicate with those group members. Subsequently, ASIC provided details of the compensation group members would likely receive and provided them with an opportunity to object to the settlement.
The settlement is now binding upon the group members adjudicated by the Court as being eligible to receive the settlement sum of AUD5,945,176. Under the terms of the settlement, PIS has until 30 November to pay the settlement.
In December 2007, ASIC commenced action against PIS in the Federal Court of Australia. ASIC alleged PIS was negligent in its provision of advice to investors in relation to the Westpoint Group, and breached its Australian financial services licence. PIS was one of seven Australian financial service licensees against whom ASIC commenced proceedings for compensation on behalf of Westpoint investors.
The investors in Westpoint-related financial products had an outstanding total capital invested of AUD393m as at January 2006 when the group collapsed.
Since November 2007, ASIC has commenced 19 civil actions seeking to recover funds for investors in the majority of the Westpoint companies, including: a claim against KPMG, the former auditors of the Westpoint Group; claims against the directors of nine Westpoint mezzanine companies, and various entities associated with a director; claims against seven financial planners; and a claim against State Trustees.
ASIC subsequently obtained court orders for a global mediation of the actions commenced by ASIC for compensation arising from the failure of the Westpoint group.