Sued adviser tripped up by paperwork
A Waikato advisory firm has been ordered to pay more than $70,000 after a judge ruled an adviser had breached the Fair Trading Act and his duty of care to a client.
Friday, November 11th 2011, 5:51AM 11 Comments
by Niko Kloeten
And according to the ruling by Judge Peter Spiller, the adviser’s lack of paperwork was part of the problem.
Kenneth Gilmour, a retired pharmacist, sued adviser Rodney Hartles and his firm Decisionmakers (Waikato) after his investments in Bridgecorp ($100,000) and Property Finance ($23,000) were hit by the receiverships of both companies in 2007.
Gilmour, who claimed for more than $140,000 (including $25,000 in damages) had been in contact with Hartles since 2000 and during that time also held investments in Strategic Finance and St Laurence.
However, the nature of their client-adviser relationship was in dispute, according to the judgment by Hamilton District Court Judge Spiller.
Gilmour, who also laid a complaint with the Institute of Financial Advisers (IFA), said he had lost money in Bridgecorp and Property Finance due to negligent advice from Hartles.
But Hartles argued his duty of care was limited in that “to a large extent Gilmour was investing of his own volition, seeking medium-risk investment portfolios, and not really listening to or seeking advice” from him.
He said Gilmour was “reasonably analytical and not poorly informed”, and said that that the first investment made by Gilmour (in Strategic Finance) was made without advice from him.
“Hartles argues that Gilmour’s case is based on hindsight, and that the failure of the two companies in question (and Gilmour’s resultant loss) were due to the global financial crisis at the time,” the judgment said.
The judge noted Hartles had received commission for each of the investments that Gilmour made through Hartles’ office, including the 2003 re-investment of $100,000 in Bridgecorp and the 2006 investments in Property Finance totalling $23,000.
He also said Hartles “appears to have recorded few details of his meetings and discussions with Gilmour, despite the multiple contacts and investments arranged (for which Gilmour obtained commission) over the period 26 June 2000 to 28 November 2006.
“The absence of records taken by Hartles was of concern to the Institute of Financial Advisers Complaints Committee, which upheld Gilmour’s complaint.
“The Committee gave serious consideration to prosecuting Hartles. The Committee said that, if Hartles’ services were solely transactional, this should have been recorded in writing to the client; and, if they were not, there “seems to have been a total non-compliance with practice standards”.”
Judge Spiller ruled that “Hartles’ breach of the Fair Trading Act 1986 caused loss to Gilmour. I am satisfied that Hartles’ breach materially contributed to Gilmour being deprived of the chance of making prudent and appropriate investments.”
He found that liability was with Decisionmakers (Waikato), which he ordered to pay $72,700 to Gilmour.
Niko Kloeten can be contacted at firstname.lastname@example.org
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