Investment blow-up: when introductions go wrong

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Accountants or financial planners might make referrals or pass on information about riskier investments to their clients. It’s not advice, they insist.

But Oculus maintained they had never “recommended Guvera shares”, “had merely passed on information relating to Guvera”, and only referred clients to Amma, so they could receive investment advice there. The couple alleged such a referral was negligent, which Oculus denied.The accountancy’s defence conceded to receiving from Amma “bonus shares in Guvera for clients that subscribed in Guvera as a gratuity”. It maintained clients were told of the arrangement; the couple said this was not disclosed.

“If a client had been proactively referred by the planner and the planner had received a commission, this would likely be a breach of our code of professional practice.”Accounting organisations said they had guidelines and rules to avoid clients perceiving introductions as endorsements, or on handling potential conflicts of interest.

“A communication is more likely to be financial product advice [if the communicator] stands to benefit depending on the decisions made by a client. This is because an intention to influence may be more readily inferred,” ASIC’s guideline states., offered a fee of 5 per cent of any investor’s funds that were “introduced” by a “service provider”.But not every adviser or accountant will accept fees or commissions.

The issue of wholesale and sophisticated investor status has come to the fore following disastrous investments marketed to such investors in Mayfair 101 products.

 

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