FYI, article in today's thewest.com.au, perhaps Fairstar and individual GWR shareholders that had their GWR and FAS shares transferred by Opes to ANZ can also seek compensation/damages from their financial advisors who most likely received substantial commissions on the transactions.
It could be an unexpected WiN WiN case for GWR-FAS shareholders. ___________________________________________________________
“Still cowboys in the West”: lawyer in Opes case
17th March 2009, 16:00 WST
A landmark trial involving collapsed stockbroking firm Opes Prime has begun in Perth, testing the principle of a broker’s duty to inform clients of the risks of securities lending.
Perth millionaire investor and former car dealer Bruce Drummond has made a claim in the Federal Court to retrieve $4.7 million he lost in Opes Prime shares through Perth resources and mining stockbroker Euroz in March 2008.
Mr Drummond learned too late that his investment company Eric Preston Pty Ltd did not retain ownership of the shares, but had transferred them to Opes Prime lenders ANZ Bank, Merril Lynch and Dresdner Kleinwort.
Mr Drummond’s lawyer Peter Bick, QC, told the court today that it was still not known where the shares ended up.
“Eric Preston was left in the position of being an unsecured creditor,” Mr Bick told the court.
“Euroz did in fact know it was a margin lending agreement.”
Euroz risk manager and director Simon Yeo knew 10 months before Opes Prime collapsed what kind of lending was on offer, Mr Bick said.
“He kept it to himself,” he said.
“Yet Opes had put it in writing to him on 10 May 2007...(that) it’s a share leasing arrangement,” he said.
“There are still some cowboys in the West, Your Honour,” Mr Bick told justice Antony Siopis.
A series of emails submitted as evidence shows discussions between Mr Yeo and various officeholders at Euroz about whether investors should be informed that securities lending was in place, Mr Bick said.
“Please be careful of any advice you provide in this area,” was the content of one email between Euroz officers, Mr Bick said.
Colleagues were also told at the time to ensure they sent disclaimers with advice issued to shareholders and investors.
Mr Drummond later found out, after realising that it was the ANZ Bank, not himself, that was listed as a shareholder at the Sundance Resources AGM, that there was something wrong.
“You don’t own any of your shares...you become an unsecured creditor for the lot,” Mr Bick told the court.
Outside the court, Slater and Gordon lawyer Mark Walter said Mr Drummond, who had had a long standing and fruitful business and personal relationship with Euroz broker Richard Caldow, had not been properly advised.
“Therefore he’s unaware that the securities lending arrangements as akin to transferring ownership of your shares with the right to have them returned in the future...distinct from margin lending where you might borrow 30 per cent of the value of your shares but still retain ownership,” Mr Walter said.
Opes Prime Stockbroking had its licence suspended by the Australian Securities and Investments Commission in March last year after the discovery of trading “irregularities”.
This is the first case brought by a shareholder to retrieve shares invested through a third party.
GWR Price at posting:
31.3¢ Sentiment: Buy Disclosure: Held
