Category Archives: LM

LM Investment Management

Unlicensed, Thailand-Based Financial Adviser Expands Illegal Business Operations Into Hong Kong

Neil Robbirt Profile

Neil Robbirt, CEO of Global Investments

In many parts of the world, commission-driven sellers of dodgy insurance policies and investment funds euphemistically describe themselves as “financial advisers”. Some stretch the truth even further, calling themselves “independent” financial advisers.

This misleading sales tactic has now been outlawed in the UK, but British insurance salesmen who expatriate to poorly regulated foreign countries continue to abuse the English language, as well as the gullibility of inexperienced investors.

Neil Robbirt, CEO of Global Investments, is one of these British salesmen.

Reckless Disregard for Thai Law

Global Investments has been headquartered in Thailand since 1994.  The company’s website states that it has sold financial products to over 3,000 people, and that it is “proud to be one of the most reputable and well-established names in the financial services industry”.

An official from the Thai Securities and Exchange Commission (SEC) has confirmed by email that Global Investments and Neil Robbirt are not licensed to sell investment products in Thailand, a fact which can be verified by checking here on the SEC’s website.

The penalty for selling investment products in Thailand without a license is between two and five years’ imprisonment and a fine of 200,000 baht to 500,000 baht.

An official from the Thai Insurance Commission confirmed by phone that Global Investments is also not licensed to sell life insurance policies.

The penalty for selling insurance policies in Thailand without a license is up to 6 months imprisonment and a fine of 50,000 baht.

Ponzi Scheme Promoter

Global Investments has left a trail of evidence on the internet showing how it misleadingly and negligently promoted the LM Managed Performance Fund (MPF), an unregulated collective investment scheme which is now known to have been a Ponzi scheme. The South China Morning Post has reported that the fund paid upfront commissions as high as 15%. The commission levels were so far above normal that it immediately sent up red flags to numerous industry insiders, such as Martyn Terpilowski, who identified the fund as a Ponzi scheme 4 years before it collapsed.

Below is an advertisement which Global Investments apparently paid for, in its attempt to boost sales and cash in on LM’s juicy commissions:

LM MPF Advertisement - Global Investments

Source: Page 5 of the 16 Sept 2011 Edition of AWOL

The ad claims there were “no fees”, even though the fund manager (LMIM) collected 5-10% per year in fees and paid salesmen up to 9% upfront commissions at the time. The ad also emphasizes that LM was regulated by ASIC, while neglecting to mention that the MPF was not.

The ad appears to target the general public, despite the fact that the MPF was a “professional investor” fund, not intended or suitable for ordinary retail investors.

“Poacher Turned Gamekeeper”

One ex-client alleges that Global Investments sold the LM MPF to over 100 people.

An LM victims group leader says that the company “topped the league table of all unlicensed Thailand-based ‘financial advisers’—both in number of clients trapped in MPF and total value of losses caused.”

After the MPF collapsed, CEO Neil Robbirt joined hands with several other “advisers” who had been flogging the fund. Together, they formed the executive committee of the “Advisers Committee for Investors” (ACI), a group of salesmen purporting to be fighting for the best interests of the people they had screwed. (See here.)

One LM victim cynically describes the ACI as “poachers turned gamekeepers”. Many believe that one of the main objectives of the ACI is to deflect attention away from the executive committee’s own greedy, reckless, and in some cases illegal behavior.

Luring Retirees into High Risk Funds

In an article originally published in the Bangkok Post, Neil Robbirt claimed that most of his clients were retirees and that he convinced them to put their money in funds that were allegedly earning returns of 12-14%.

In the same article, he also plugged the LM MPF’s “fixed rate of return” of 8.32%, which was itself so high that it was too good to be true.

On his company’s website, Mr. Robbirt is quoted as saying, “discretion is guaranteed in the interests of each and every Global client, and we believe we have developed a renowned reputation based on integrity, professionalism and the provision of expert advice.”

A legitimate “expert” financial adviser should know that high rates of return are obtained by taking high risks. An expert adviser should also know that it is reckless for retirees to allocate large portions of their portfolio to high risk assets, as retirees cannot afford to lose a lot of money. Most retirees are too old to reenter the workforce and rebuild a lifetime of savings.

It is therefore hard to understand how funds allegedly earning 12-14%, or even 8%, could be construed as in the best interests of retirees.

A 100% Return Becomes a 100% Loss

In the same Bangkok Post article mentioned above, Mr. Robbirt boasted about a property fund he was recommending. He said he expected investors to double their money.

This particular property fund invested in a “luxury development outside Pattaya called Ocean’s Edge, [consisting] of 32 exclusive penthouse-style apartments with infinity pools developed by an Australian Team.”

After being introduced by a “friend”, one of Global Investments’ ex-clients says Mr. Robbirt convinced him to invest 2.5 million baht in the Ocean’s Edge fund in 2007. He was told he’d get his money back plus 100% profit within three years. He was also promised an additional 15% interest for each year that the money was not repaid on time.

As of 2015, no money has been repaid. The apartments remain empty, as no buyers have materialized.

The ex-client is not optimistic that he will ever see his money again.

Making matters worse, he says Mr. Robbirt also convinced him to sink tens of thousands of pounds in the LM MPF Ponzi scheme, and tens of thousands more in a Zurich policy which he eventually cashed in at a 60% loss.

Below is a promotional video for the unsold Ocean’s Edge apartments:

The ex-client claims that Mr. Robbirt put a deposit on one of the Ocean’s Edge apartments himself. He says Mr. Robbirt used this fact to underline his confidence in the inevitable success of the fund he was promoting. When he was finished promoting the fund, Mr. Robbirt withdrew from the venture and recouped his deposit back.

Mr. Robbirt now claims he never earned a penny promoting the fund, and he takes no responsibility for his clients’ losses or the fund’s failure.

How a “Financial Adviser” Earns His Pay

Another former Global Investments client, who was also introduced by a friend, says Mr. Robbirt convinced him to put over half a million pounds in the LM MPF. The victim describes his experience with Mr. Robbirt as follows:

“Our last meeting was in February 2013. The agenda contained an item expressing reservation over my [relatively high] exposure to the LM MPF. At the meeting the item was met with what could almost be described as a rebuke for suggesting I should decrease my exposure to LM MPF. In no uncertain terms was I assured of the depth, quality and strength of the fund and consistency of performance and he saw no reason to adjust my position.

Less than a month later 2/3 of my life savings had gone.

I raised every aspect of my complaint with him over email and I have asked that at the very least all the LM commission he earnt is returned to me. He would not reveal his earnings but in my estimation it is over £80,000. He has point blank refused to consider any return.”

Dishonest as Ever

Currently, the “About Us” page of Global Investments’ website says:

Our philosophy is based on service through best advice. That means placing our client’s best interests at the heart of everything we do. As an independent company we are not tied to any one product or service provider. This translates into unbiased advice, fair and transparent terms and conditions, highly competitive fees and charges and a range of solutions from global financial institutions in highly regulated jurisdictions with routes of recourse and government backed investor protection schemes.

Before trying to determine how many lies and half-truths are in the above paragraph, consider the following facts:

  • LM victims have had no “routes of recourse” in any jurisdiction, let alone a “highly regulated” one.
  • An “independent” financial adviser, as defined by British law, is one who has no conflicts of interest, i.e., one who does not accept commissions from product issuers and is licensed to give investment advice on all products available in the market. An “independent” financial adviser only receives payment directly from his/her client.
  • Global Investments once paid for advertising in a Thai magazine, but rather than try to sell unbiased advice, it attempted to sell a high commission investment fund (the LM MPF), acting as the de facto marketing division for the fund manager. Global Investments’ website features prominent information about high commission, ripoff insurance wrappers (portfolio bonds), but the website does not mention low-cost, no-commission investment products, such as ETF index funds.
  • Global Investments has withheld information from clients about the commissions it has received. In some cases, Global Investments has claimed that there were “no fees”. News reports indicate that the commissions received by Global Investments were exorbitant. 

Global Investments Expands Into Hong Kong—Without a License

Recently, Global Investments upgraded its website, globalinvestments.net. The company purports to have an office in Hong Kong, situated in the famous and very expensive Two IFC Tower. Former clients say they were previously unaware that Global Investments had an office in Hong Kong.

Global Investments International - Website Home Page

Screenshot of the globalinvestments.net home page, taken on March 30, 2015

Global Investment’s main website links to an affiliated website, qropdirect.com, which contains information that aims to convince former British residents to transfer their life savings into high commission investment and insurance products.

QROPS Direct Website

Screenshot of qropsdirect.com home page, taken on April 2, 2015

There are no records that Global Investments, QROPS Direct, or Neil Robbirt are licensed to sell insurance and investment products in Hong Kong. Searches on the SFC, CIB, and PIBA websites come up empty.

The penalty for selling investment funds in Hong Kong without a license is up to 7 year imprisonment and a fine of $5 million HKD.

Selling insurance policies without a license is punishable by up to two years imprisonment and a fine of $1 million HKD.

Global Investments’ Hong Kong Office Is Merely “Virtual”

Global Investments’ Hong Kong address is listed as the 19th floor of Two IFC. A Google search for this address brings up links to a company called ServCorp, which offers a cheap service known as the “virtual office”.

Below are some ads excerpted from ServCorp’s website:

Your Address Could Be Here!

Your Phone Answered As You Like

“A Business of Any Size Can Sound Like a Fortune 500 Company”

ServCorp openly admits that it helps small financial services companies dupe potential clients into believing that those companies are more well-established than they really are. The service is a godsend for fly-by-night operators like Global Investments, who do not have a license to operate legally.

“Your Calls Will Find You No Matter Where You Are”

ServCorp offers companies based in one country (such as one with a weak legal and regulatory system) the opportunity to appear to be based in another. Global Investments apparently found this service to be appealing and potentially lucrative.

A Phone Call with a “Global Investments” Receptionist

I made a few calls to the phone number listed under Global Investment’s Hong Kong address. I recorded those phone calls and have uploaded them below.

Clip 1

In the first call, the receptionist answered the phone saying, “Global Investments Hong Kong Limited. How may I help you?”

When I told her that her company appeared to be unlicensed, she tried to transfer me to “Mr. Neil”, the company’s CEO.  I told her I did not want to talk to Mr. Neil, and that I instead wanted to talk to her. When I asked her whether she worked for ServCorp, she admitted that she did.

She then transferred me to Mr. Neil, so I hung up.

Clip 2

When I called again, I asked if ServCorp had a policy of checking whether its clients were licensed to do the businesses they were purporting to be doing. The receptionist said there was no such policy. She then transferred me to another receptionist who pretended that she did not work for ServCorp but instead worked for Global Investments.

At one point, she said she could not hear me and hung up. I am not sure if she was lying.

Clip 3

When I called again, the receptionist continued to pretend that she worked for Global Investments and not ServCorp, so I asked how long Global Investments had been selling investment products in Hong Kong. She said, “Since 2003”.

I repeated that the company appeared to be unlicensed. I asked her if she could tell me whether Global Investments was a “legitimate company”.

She said, “I cannot provide the information for you at this moment.”

I told her that information on the internet indicated that Global Investments had historically been based in Thailand. I asked whether Mr. Neil was currently in Hong Kong or Thailand. She said she didn’t know.

I was eventually transferred to Mr. Neil again, so I hung up.

Clip 4

When I called again, I pointed out that both Global Investments and ServCorp had exactly the same address. I asked the receptionist whether she worked for both companies. She said no. I told her I thought she was lying.

I pointed out again that Global Investments was not licensed to sell investment products, and I explained to her that selling investment products without a license was a criminal offense in Hong Kong.

I told her I wanted to know ServCorp’s policy regarding clients who were breaking the law. I asked whether ServCorp would continue to facilitate illegal activity, or whether it would terminate its business relationship and report illegal activity to authorities.

Before she could answer, we were cut off by a bad connection.

Clip 5

When I called back, the receptionist would not tell me anything about ServCorp’s policy regarding clients who were breaking the law. I concluded by telling her I thought ServCorp should stop doing business with Global Investments and report “Mr. Neil” to the authorities.

Ex-Clients Seek Justice

Many ex-clients of Global Investments have lost significant portions of their retirement savings. They have spent more than two years trying to recover their money, but so far, they have had no success.

Earlier this week, both the Thai and Hong Kong regulators were informed of Global Investments’ unlicensed business operations.

To date, the company has been allowed to operate outside the law for over twenty years without being held accountable.

Indignant ex-clients are hoping that regulators will finally bring Neil Robbirt and his company to justice.

Unlicensed Financial Advisers Defy Thai Regulator After Being Placed on Investor Alert List

In July 2014, Professional Portfolio International was placed on the Thai SEC’s investor alert list after the company was caught selling dodgy, high commission insurance policies and investment funds without a license. Eight months later, PPi appears to be at it again.

PPi Logo (2)

PPi’s website (ppi-advisory.com) remained inactive after it was placed on the SEC’s alert list. However, a few weeks ago, PPi advertised an event at the following venue in Bangkok:

PPI Events March 10

Recklessly, PPi afterwards posted photos of the event on its website, giving the SEC sufficient evidence to take PPi to task for repeated lawbreaking. Two of the photos show PPi’s advisers giving a PowerPoint presentation on “Investing in Managed Futures”.

An angry ex-client has forwarded the above information to the Thai SEC. One of PPi’s advisers, Gary Bradford, advised the ex-client to invest—through a QROPS and a portfolio bond—in the LM Managed Performance Fund, an unregulated fund which paid abnormally large commissions and is now known to have been a Ponzi scheme.

Gary Bradford is visible in the audience in photos 3 and 6 above.

The ex-client claims that Bradford “fraudulently used pretend qualifications from the Chartered Institute for Securities & Investments (CISI, UK)”.

After the ex-client filed complaints with CISI, CISI confirmed that Bradford was not a member and asked him to remove the credential from his LinkedIn profile and business cards. Bradford has not yet removed the credential from his LinkedIn profile.

Gary Bradford LinkedIn Profile

The ex-client has not recovered any money yet, but would be pleased to at least see PPi’s advisers behind bars.

According to an article in the South China Morning Post, the penalty for selling investment products in Thailand without a license is “between two and five years’ imprisonment and a fine of 200,000 baht (HK$48,650) to 500,000 baht”.

Gary Bradford’s photo has been removed from the “Our Team” section of PPi’s website, though he apparently continues to be part of the team. Eric Jordan and Roger Parry are currently listed as senior figures at PPi:

PPI - Eric Jordan & Roger ParryPPi’s website claims that it has an office at the address below. If true, the SEC would do well to pay a visit.

PPI Address

LM Sales Manager, Martin Venier, Reappears with Self-Promotional Website

Martin Venier Profile PhotoIf LM victims were wondering what happened to LM’s Hong Kong sales manager, Martin Venier, they now have an answer.

He recently set up a website, MartinVenier.org, through which he is promoting himself and the financial services of an alleged group of scientific, mathematical, and economic experts.

The alleged group calls itself “Portfolio Resilience Investor Analytical Services (PRIAS)”. A search for the group on the internet retrieves no results, except for Venier’s website.

Portfolio Resilience Investor Analytical Services

One of the services offered by PRIAS is described as “Curation Filtering”. A search for “curation filtering” suggests that the phrase was invented by Venier and his colleagues. Its meaning is unclear.

Note that the words “curation” and “filtering” are synonyms, so joining them together is redundant—a bit like combining the words “bamboozle” and “swindling”.

Self Managed Hedge Fund

Listed under “Curation Filtering” is a service called the “Self-Managed Hedge Fund (SMHF)”.

Unlike “Curation Filtering”, a search for “Self-Managed Hedge Fund” does retrieve results.

One of those results is the “First Meetup for Cybertraders Anonymous“, which took place in Sydney Australia on July 25, 2013 and was organized by a guy named Kingsley Jones.

At the meeting, Jones said he would be giving a presentation on the Self-Managed Hedge Fund, and he’d reveal how to become George Soros “in your bedroom”.

Kingsley J - Become Mr Soros in your bedroom

Six months ago, Jones announced on Twitter that the SMHF had been launched:

Self-Managed Hedge Fund is Here - 27 Aug 2014

On his blog, Martin Venier claims he is in Australia (and very busy with clients), so it’s possible that he is collaborating with Jones, helping to promote the SMHF, aiming to get obscenely rich from his bedroom.

[Note: About six months ago, Venier appeared to be a member of an Australian bitcoin group. This info was obtained from a link which has since been deleted. Several bitcoin scams have recently been in the news.]

The Big Investment Lie

Michael Edesess, author of The Big Investment Lie: What Your Financial Adviser Doesn’t Want You to Know, is scathingly critical of financial advisers and fund managers. He argues that most of them collect unjustifiably high fees for doing little more than ripping off investors.

Given that Edesess’ criticisms are aimed precisely at people like Venier and the others who were involved with the LM scam, it is surprising that Venier published an article written by Edesess on his website:

Edesess Photo on Venier's Website

Photo is of Michael Edesess. He was recently a visiting fellow at City University of Hong Kong. He also wrote a handful of articles for South China Morning Post.

One of Edesess’ quotes perfectly describe the LM debacle:

Corrupt Financial Advisory Services

Another of Edesess’ quotes aptly describe the mumbo jumbo (e.g., “curation filtering”) which Venier’s PRIAS group uses to describe its services:

Complicated-Sounding Products

At first, I assumed that Venier had published Edesess’ article without Edesess’ permission, so I contacted Edesess to warn him.

Stunningly, Edesess confirmed that he had known Venier for years and had given him permission to publish the article.

Even more surprisingly, Edesess told me that he did not believe that Venier was knowingly involved in any fraudulent activity when he worked at LM. He said the LM situation was “complicated”, and he did not believe that Venier should be held responsible.

However, after receiving my email, Edesess contacted Venier and asked him to remove the article from his website, which Venier has now done.

Edesess told me he “did not have time to deal with the matter”, presumably meaning that he did not want to be perceived as connected in any way with LM. He says he is currently working on a start-up in the United States.

Is Venier Innocent or Was Edesess Duped?

Readers of Martyn Terpilowski’s LM Emails will recall that, in late 2011, as Terpilowski was desperately trying to get his clients’ money out of the MPF, Venier made statements which suggested that the fund was operating like a Ponzi scheme. Specifically, Venier suggested that old investors were being paid back with new investors’ money, rather than with profits earned from investments.

When Terpilowski pointed this out to Venier, and when he pointed out that it was unethical (if not illegal) to continue promoting a fund in which existing investors were locked in against their will, Venier just dodged the issues, never giving a satisfactory response.

This was nearly one and half years before LM went up in smoke.

Martin Venier’s Cognitive Dissonance

In a couple of sections on his website, Venier talks about the psychological phenomena of “cognitive dissonance” and “confirmation bias”. Although he does not explicitly say it, it is easy to imagine that Venier is describing his own experiences at LM, particularly his experiences interacting with Martyn Terpilowski:

Martin Venier's Cognitive Dissonance, Internal Pain, and Physical Tension 

Venier no doubt had “uncomfortable feelings” when hearing Terpilowski call the MPF a Ponzi scheme and a fraud. This may have led Venier to seek information which confirmed the views (the LM sales pitch) which he was paid to believe and disseminate.

Venier claims that he created his new website “to prevent us from becoming victims of groupthink”. He seems to believe that he is uniquely qualified to perform this service, perhaps due to his firsthand experience.

Why 'We' Exist (underlined in red)

Notice the paragraph underlined in red. It seems as if Venier is subconsciously warning readers to carefully consider his former role at LM (i.e., the context shaping his current thoughts and actions) before assessing the information and services on his website.

Venier Continues to Criticize Everyone But Himself

After LM collapsed, Venier and Terpilowski had a very heated email exchange, in which Venier insulted Terpilowski, accused him of throwing his clients under the bus in order to cash in on LM’s excessive commissions (when the opposite was true), and he threatened to call the police. Venier never apologized for being wrong or for his role in helping LM defraud thousands of investors (whether wittingly or unwittingly).

Now, on his new website, Venier continues to construe himself as being totally innocent, while simultaneously casting blame on everyone else. He even describes himself as an “advocate for investors”.

Venier specifically blames fund managers (presumably Peter Drake), financial advisers, and investors for having “unrealistic expectations” that the MPF could “generate liquidity and capital stability simultaneously.” He says it was “a task all properly trained financial market practitioners understand is not achievable.”

Presumably, Venier views himself as “a properly trained financial market practitioner” who never had “unrealistic expectations” for the MPF. If that is true, it raises the question: Why didn’t he blow the whistle on Peter Drake and the so-called financial advisers, rather than continue facilitating the fraudulent marketing of the LM MPF to inexperienced retail investors?

Venier maintains he was innocent, but his commentary suggests that he was complicit.

Venier heaps blame on financial advisers for not disclosing the excessive commissions which LM paid, yet Venier is silent on whether LM did anything wrong by paying excessive commissions to incentive financial advisers to distribute a fund which Venier admits was doomed to fail.

Venier additionally criticizes financial advisers for being ignorant, lacking “real market experience”, having “poor formal training”, and promoting the MPF using false or misleading information. (Note that Venier admits to training these advisers, so maybe he should take some responsibility.)

Venier also blames some investors for “lacking savings” (i.e., investing aggressively in MPF’s promise of high and safe returns in order to make up for their lack of savings), which implies that Venier knew the MPF was being illegally/improperly sold to retail investors (i.e., those investors with less than $1 million USD in savings and no professional investing experience).

Below are two screenshots of Venier’s self-written biography on his website. The first screenshot is the original version. The second screenshot shows a paragraph about LM which Venier recently revised. Notice that Venier never actually says he worked for “LM”. Instead, he says he worked for “a fund manager with Australian property assets”.

Original Version

Who Is Martin Venier (Underlined)

Red underlining and comments were added for emphasis.

Revised Section on LM

Venier's Revised Bio (LM Section)

Illegal Activity?

Venier recently removed the content from the “Services” section of his website. It once openly promoted services including: Portfolio Resilience Investor Analytical Services, Curation Filtering, and the Self-Managed Hedge Fund.

The website now says it is not promoting anything:

Services Suddenly Restricted to Members Only

It’s unclear why Venier made the changes, but perhaps he was afraid of being reported to the SFC for violating Section 103 of Hong Kong’s Securities and Futures Ordinance (issuing unauthorized investment advertisements to the Hong Kong public), which is a criminal offense.

A screenshot of all his original service offerings is here:

Martin Venier's Services

Interestingly, the “Contact” page of Venier’s website shows that the PRIAS group is currently doing business in a region which appears to be Hong Kong (see the purple dots):

Current PRIAS Consulting Client Locations Screenshot

A search on the SFC’s website indicates that the PRIAS group is not licensed to do business in Hong Kong. Carrying on a business in an SFC-regulated activity without an SFC license is a criminal offense (see SFO Section 114).

Further Reading

The LM Emails (#7): New Sales Manager, Martin Venier, Implied that LM Was Operating Like a Ponzi Scheme

The LM Emails (#10): When Asked If LM Gave Special Treatment to Bond Investors, Martin Venier Dodged the Question

The LM Emails (#13): When LM Collapsed, Salesman Martin Venier Offered No Apologies—Only Insults and Threats

LM’s Unauthorized Fund Documents: Distribution to the Public Was a Criminal Offense

[The information in this blog post is intended to be a resource for LM victims in Hong Kong who are filing complaints with SFC, OCI, the police, and any other authority. A link to this post has been sent to all authorities. If any readers are not familiar with the LM scandal, read the the SCMP article, When an Investment Fund Goes Bad.]

LM MPF Information Memorandum Dec 2012

The LM Managed Performance Fund (MPF) was not authorized by the SFC for distribution to the Hong Kong public. According to Section 103 of the Securities and Futures Ordinance, it would have been a criminal offense for a financial adviser or insurance company to issue any of the related MPF fund documents (such as the Fact Sheet or Information Memorandum) to a non-professional investor. The penalty for an offense is a fine of up to $500,000 HKD and up to three years imprisonment.

Several LM victims who were interviewed by the South China Morning Post said that they were not asked to prove that they were professional investors, and “on their application forms, the sections regarding professional investor status [were] crossed out.” Presumably, these investors were not professional investors.

SFC Issued a Warning to the Industry in 2005

SFC Issued Another Warning to the Industry in 2009

Many LM victims were sold the MPF fund through a “portfolio bond”, which is a type of life insurance policy called an investment-linked assurance scheme (ILAS). ILAS policies, like investment funds, must be authorized by the SFC before being distributed to the Hong Kong public. If either the ILAS policy or the underlying investment funds are not SFC-authorized, it would be illegal to issue an invitation, advertisement, or other document inviting the public to purchase these products.

Even LM Warned Financial Advisers and Insurance Companies to Avoid Breaking the Law

LM Investment Management was fully aware of Hong Kong’s laws regarding the marketing of unauthorized funds to the public. That is why nearly every document that LM issued contained a warning to intermediaries which stated, “Not for distribution to Hong Kong public.”

Here is an excerpt from one of the MPF Fact Sheets, dated November 2012. See the red arrow:

Excerpt from the Jan 2013 LM Fact Sheet (Highlighted)

Excerpt from the LM MPF Nov 2012 Fact Sheet

Financial Advisers and Insurance Companies Broke the Law Anyway

The MPF Information Memorandum for bond providers (i.e., insurance companies) was packaged together with the MPF Application Form. The Information Memorandum states that it is designed for bond providers to give to their policyholders (“Indirect Investors”) for the purpose of providing information to them about the fund. The Information Memorandum also states that policyholders should read the Information Memorandum before directing the bond provider to invest in the MPF on their behalf:

In other words, the bond providers had a duty to give the MPF Information Memorandum to their policyholders, so that the policyholders could read the document and make an informed decision about whether they wanted to be exposed to the risks of the MPF.

If the bond provider gave the Information Memorandum to a Hong Kong policyholder who was not a “professional investor”, the bond provider would have committed a criminal offense.

As reported by SCMP, several LM victims who invested in the MPF, apparently through a portfolio bond, were never asked to show proof that they were a “professional investor”. These investors were presumably not professional investors.

When submitting the MPF Application Form, bond providers were required to affirm that they had broken no laws, such as when they gave the Information Memorandum to their policyholders:

Bond providers could not have given the Information Memorandum to a non-professional investor without breaking the law. It may be the case that some bond providers additionally committed an act of fraud by affirming that they did not break any laws.

Fraud is an act of deception perpetrated for financial gain. Bond providers clearly had something to gain when investing in the MPF. As explained by whistleblower Martyn Terpilowski, the LM MPF fund was very popular with advisers because the fund paid such high commission—as high as 15% upfront. Bond providers who did not process applications for the MPF fund risked losing business to their competitors, as advisers would simply advise clients to use an alternative bond provider who would process the application. 

Bond providers are not the only ones who may have broken the law. Advisers also had a duty to give the MPF fund documents to clients. According to a 2010 MPF Fact Sheet (which was for “Adviser / Intermediary Information Only”), the fine print stated that “investors must have read and considered the current Information Memorandum before investing in or holding this product”.

March 2010 Fact Sheet - Adviser or Intermediary Information Only (Highlighted)

LM MPF March 2010 Fact Sheet. “For Adviser / Intermediary Information Only”

Investors Must Have Read the Information Memorandum Before Investing - March 2010 Fact Sheet (Underlined)

LM MPF March 2010 Fact Sheet. Investors must of have read the Information Memorandum before investing.

If advisers gave the Information Memorandum to any clients who were non-professional investors, they committed a criminal offense.

SFC Must Hold Lawbreakers Accountable to Deter Future Violations and to Ensure that Victims Receive Justice

There is very strong evidence that both insurance companies and financial advisers (i.e., insurance brokers) violated Section 103 of the Securities and Futures Ordinance when they distributed the LM MPF fund. I hope the SFC will look into this matter further and punish anyone who is guilty of breaking the law. This will deter other insurance companies and financial advisers from feeling tempted to break the law again in the future.

However, the top priority of the SFC should be to keep in mind that many LM victims are retirees who have lost their life savings. These victims are facing and will continue to face severe financial hardships unless they receive compensation.

The SFC should also note that LM victims are scattered across the world, yet it appears that no regulator in any country has taken action against the financial advisers and insurance companies who irresponsible/unethically/illegally distributed the LM funds to their clients. I have personally been in contact with LM victims from more than half a dozen different countries, and a number of them have told me that they are all closely watching developments in Hong Kong, as they are hopeful that Hong Kong regulators will be the first to act and set a precedent for regulators across the region.

I hope the SFC does not let these people down.

LM’s Unauthorized Fund Documents

Below is a list of all the unauthorized LM fund documents which have been forwarded to me by several different sources. Click on the links to download.

LM MPF Summary Flyer – July 2008

LM MPF Fact Sheet – March 2010

LM MPF Summary Flyer – Sept 2010

LM Portfolio Bond Commission Instruction Form – Jan 2011

LM MPF Information Memorandum – 22 Feb 2011

LM MPF Rate Sheet – March 2011

LM MPF Fact Sheet – 30 June 2011

LM MPF Fact Sheet – 31 August 2011

LM Product Range and Upfront Commission Rates – 6 Oct 2011

LM – A Safe Harbour for Nervous Investors – 7 Dec 2011

LM MPF Fact Sheet – 30 Nov 2012

LM MPF Disclosure Update – 30 Nov 2012

LM MPF Information Memorandum and Application Form – 14 Dec 2012

LM MPF Fact Sheet – 31 Jan 2013

LM MPF Disclosure Update – 31 Jan 2013

LM MPF – List of Portfolio Bond, Platform, Trust, & SIPP Providers – 31 Jan 2013

Anyone who has more LM documents which are not listed here, please send them to me (lindelll@gmail.com), and I will add them to this list.

New Additions (Added on 23 Jan 2015)

LM MPF Three Highlights – Nov 2009 – Coomera Capalabra, Runaway Bay

LM MPF Information Memorandum – 25 Nov 2009

LM MPF Information Memorandum – 1 Nov 2011

LM MPF Audited Annual Report – 30 June 2012

LM MPF Update – Dec 2012

Peter Drake Responds to Questions about LM MPF – 1 March 2013

The Law: Section 103 of the SFO

Below, I have provided screenshots and links to sections of the law which I think are the most relevant to LM victims. Note that I am not a lawyer, so maybe I overlooked something.

Section 103 of the SFO states that it is an “offense to to issue advertisements, invitations or documents relating to investments in certain cases” (e.g., to non-professional investors). Note that the LM MPF was a “collective investment scheme” as mentioned in paragraph (b) below.

The Offense

Section 103(1) of the SFO

Section 105 of the SFO grants the SFC the ability to “authorize issue of any advertisement, invitation, or document which is or contains an invitation to do any act referred to in Section 103(1)” above. The MPF fund documents were not authorized under Section 105 of the SFO.

Penalty for an Offense

The maximum penalty for an offense is a fine of up to $500,000 HKD and 3 years imprisonment.

Section 103(4) of the SFO

Exceptions to the Rule

Unauthorized funds and related documents can be issued to “professional investors” without committing an offense.

Section 103(3) of the SFO

Section 103(3k) of the SFO

The Definition of a “Professional Investor”

The definition of a professional investor is described in several paragraphs in Schedule 1 of the SFO. The relevant paragraph is (j):

Definition (j) of Professional Investor in Schedule 1 of the SFO

Section 397 of the SFO grants the SFC the ability to make rules.

The rules made by the SFC regarding “professional investors” are located in two places. The first place is in the SFO under the Securities and Futures (Professional Investor) Rules Section 3. The part which concerns LM victims is paragraph (b), which states that individuals who have a portfolio of $8 million HKD or more will be regarded as professional investors:

Professional Investor - SFO Rules

The second place which describes SFC’s rules regarding “professional investors” is in SFC’s Code of Conduct, beginning on page 35:

Professional Investor - SFC Code of Conduct

Anyone who knows more about Hong Kong law than I do may feel free to leave a comment below or email me if I have left out any important information or made a mistake. (lindelll@gmail.com)

Essential Info for ILAS Victims: How to File a Complaint

[NOTE: This is the first in a series of posts I’ll be publishing over the coming days. It deals with the logistics of filing a complaint. The next posts will explain in detail all the laws and regulations which the insurance industry has broken. That info can help you write your complaint. For convenience, I have added the information contained in this post to the Resources page of this website.]

Snow ball

Snowball effect: As complaints pile up, pressure grows for regulators and law enforcers to take action.

ILAS victims (including savings scam and portfolio bomb victims) should file a complaint with every regulator and law enforcer that is responsible or potentially responsible for handling any matter related to your case. This will increase the likelihood of recovering your money.

When you file a complaint with a self-regulatory organization (such as PIBA, CIB, or IARB), make sure you copy your complaint to the Office of the Commissioner of Insurance (OCI), which has a duty to monitor how these organizations handle your complaint. None of these self-regulatory organizations can be trusted, as the committee members are also the executives of companies which openly scam consumers and violate regulations. They protect their own interests, not the interests of the people they scammed.

Below, I have listed all the relevant regulators/law enforcers and their contact information, accompanied by notes which explain what the regulator/law enforcers do and other important facts.

For convenience, if you would like to send a complaint to some or all of the relevant regulators/law enforcers simultaneously, I have listed their email addresses here at the top, so that you can simply copy and paste:

iamail@oci.gov.hkcomplaint@sfc.hkbankcomplaints@hkma.gov.hkgeneral@icac.org.hkcrimeinformation@police.gov.hkcc@consumer.org.hkmpfa@mpfa.org.hkhkfi@hkfi.org.hkinfo@piba.org.hkinfo@hkcib.orgcomplaints@ombudsman.hkbc_06_13@legco.gov.hkiia_consultation@fstb.gov.hkfso@fso.gov.hk

At the bottom of this post, I have provided links to laws, lawsuits, regulations, and codes of conduct which will be of interest to people filing complaints.

Anyone who has questions or would like help filing a complaint can send me (Lindell Lucy) an email: lindelll@gmail.com

Filing a Complaint

Office of the Commissioner of Insurance (OCI)
Website: http://www.oci.gov.hk/about/index08.html
Email: iamail@oci.gov.hk
Phone: 2867 2565
Address: 21st Floor, Queensway Government Offices, 66 Queensway, Hong Kong.
Note: You can file a complaint against any insurance company, insurance agent, or insurance broker with OCI. Your complaint will be forwarded to the relevant self-regulatory organization (PIBA, CIB IARB). OCI will monitor their handling of your complaint. It would be foolish to file a complaint with a self-regulatory organization without notifying OCI, as your complaint may not be handled in a fair manner.

Securities and Futures Commission (SFC)
Website: http://www.sfc.hk/web/EN/lodge-a-complaint/
Email: complaint@sfc.hk
Phone: 2231 1222 (press 2 after selecting your preferred language)
Address: 35/F, Cheung Kong Center, 2 Queen’s Road Central, Hong Kong
Relevant Laws: Section 114 and Section 103 of the Securities and Futures Ordinance
Note: If your insurance broker has an SFC license and he/she has breached SFC regulations or the SFC Code of Conduct, you can file a complaint with the SFC. (You can do a search on the SFC’s website to see if your broker has an SFC license.) If your insurance broker/agent violated the Securities and Futures Ordinance, regardless of whether they hold an SFC license, you can file a complaint against them with the SFC. Self-regulated insurance brokers are terrified of SFC!!!

Hong Kong Monetary Authority (HKMA)
Website: http://www.hkma.gov.hk/eng/other-information/contact-us.shtml
Email: bankcomplaints@hkma.gov.hk
Phone: 2878 8196
Address: 55th Floor, Two International Finance Centre, 8 Finance Street, Central, Hong Kong
Note: If you were sold a ripoff insurance policy in a bank, then you file your complaint with HKMA, as it is the bank regulator. You can also send the complaint to OCI.

Independent Commission Against Corruption (ICAC)
Website: http://www.icac.org.hk/en/report_corruption/index.html
Email: general@icac.org.hk
Phone: 25 266 366
Address: G/F, 303 Java Road, North Point, Hong Kong
Hours: Open 24 Hours
Relevant Law: Section 9 of the Prevention of Bribery Ordinance
Note: If you were sold an insurance policy by a broker, then you may be able to complain with the ICAC. A broker is supposed to be your agent, not the agent of an insurance company or fund company. The broker must disclose any conflicts of interest, especially about commissions. If your broker did not get your permission to receive a commission (a kickback from the product issuer), and if he/she did not disclose material information about how much commission he/she received and when he/she received it, then he/she violated Section 9 of the Prevention of Bribery Ordinance, which is an offense punishable by $500,000 in fines and 7 years imprisonment.

Hong Kong Police
Website: http://www.police.gov.hk/ppp_en/02_er_room/
Email: crimeinformation@police.gov.hk (only accept attachments up to 10 MB)
Phone: 2860 5012 (Commercial Crime Hotline)
Address: Find your nearest police station.
Hours: Open 24 hours.
Relevant Laws: Section 16A of the Theft Ordinance and/or Section 36 of the Crimes Ordinance
Note: If you were sold a scam insurance policy (a fraud), or if your broker deceived you for financial gain (defrauded you), then file a fraud complaint against the insurance company who created the scam and the insurance agent or broker who sold it to you. Fraud is a serious offense punishable by up to 14 years imprisonment.

Consumer Council
Website: http://www.consumer.org.hk/website/ws_en/complaints_and_advices/how_to_complain/howtocomplain.html
Email: cc@consumer.org.hk
Phone: 2929 2222
Address: Find your nearest Consumer Advice Center.
Hours: Mon to Fri, 9:00 – 1:00, 2:00 – 6:00
Note: Any ripped off consumer can file a complaint with the Consumer Council. The Consumer Council will act as a mediator and a monitor, similar to OCI.

Mandatory Provident Fund Schemes Authority (MPFA)
Website: http://www.mpfa.org.hk/eng/supervision/mpf_intermediaries/complaints_against/index.jsp
Email: mpfa@mpfa.org.hk
Phone: 2918 0102
Address: Units 1501A and 1508, Level 15, International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong.
Note: Many insurance agents and insurance brokers hold an MPFA license, and presumably, they should have to abide by MPFA’s Code of Conduct, which is more strict than the self-regulatory codes of conduct. File a complaint to MPFA if your agent/broker held an MPFA license and breached the MPFA code of conduct.

Hong Kong Federation of Insurers (HKFI)
WARNING: Self-Regulatory Organization / Has Conflicts of Interest
Website: http://www.hkfi.org.hk/#!/consumer-zone/avenue-for-complaints
Email: hkfi@hkfi.org.hk
Phone: 2520 2728
Address: 29/F Sunshine Plaza, 353 Lockhart Road, Wanchai, Hong Kong
Note: If you want to file a complaint about an insurance company (for creating a scam product and selling it to you), send the complaint to HKFI. Copy your complaint to OCI, so OCI can monitor the complaint. If you are complaining about a company’s agent, the complaint will go to the IARB.

Insurance Agents Registration Board (IARB)
WARNING: Self-Regulatory Organization / Has Conflicts of Interest
Website: Go to HKFI’s website.
Email: hkfi@hkfi.org.hk
Phone: 2520 1868
Address: 29th Floor, Sunshine Plaza, 353 Lockhart Road, Wanchai, Hong Kong
Note: The IARB was set up by HKFI. If you were sold a ripoff insurance policy by an insurance agent (not a broker), complain to IARB. Copy your complaint to OCI, so OCI can monitor the complaint. An insurance agent is the agent of a particular insurance company, whereas an insurance broker is your agent and is not tied to a particular insurance company.

Professional Insurance Brokers Association (PIBA)
WARNING: Self-Regulatory Organization / Has Conflicts of Interest
Website: http://www.piba.org.hk/index.php/en/about-piba/establishment-of-piba
Email: info@piba.org.hk
Phone: 2869 8515
Address: Room 2507-08, 25/F, China Insurance Group Building, 141 Des Voeux Road Central, Hong Kong
Office Hours: Mon to Fri, 9:00 – 12:30 / 1:30 – 6:00
Note: Insurance brokers are self-regulated by two different organizations, PIBA and CIB. If you were ripped off by an insurance broker, check to see whether your broker is licensed with PIBA or CIB. You can search the register of members on PIBA’s website to find out if the broker is licensed with PIBA. Note that there is a register for companies and a register for individuals. Complain to the organization with which your broker is licensed with. Copy your complaint to OCI, so OCI can monitor the complaint.

Confederation of Insurance Brokers (CIB)
WARNING: Self-Regulatory Organization / Has Conflicts of Interest
Website: http://www.hkcib.org/hkcib/en/about/ourMission.html
Email: info@hkcib.org
Phone: 2882 9943
Address: Room 3407, AIA Tower, 183 Electric Road, Fortress Hill, Hong Kong
Note: Insurance brokers are self-regulated by two different organizations, PIBA and CIB. If you were ripped off by an insurance broker, check to see whether your broker is licensed with PIBA or CIB. You can search the register of members on CIB’s website to find out if your broker is licensed with CIB. Complain to the organization with which your broker is licensed with. Copy your complaint to OCI, so OCI can monitor the complaint.

Office of the Ombudsman
Website: http://www.ombudsman.hk/en-us/how_to_lodge_a_complaint.html
Email: complaints@ombudsman.hk
Phone: 2629 0555
Address: 30/F, China Merchants Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong
Hours: Mon to Fri, 8:45 a.m. to 5:45 p.m
Note: If SFC, HKMA, or OCI is not handling/monitoring your complaint in a responsible manner, then file a complaint against them with the Office of the Ombudsman.

Legislative Council (LegCo)
Website: http://www.legco.gov.hk/general/english/members/yr12-16/biographies.htm
Email: Click HERE to download the emails of all LegCo members.
Phone: Click HERE to download the phone numbers of all LegCo members.
Note: You can try contacting one of the 70 members of the LegCo for help. LegCo members have power and influence. I suggest you avoid members of the LegCo who are not democratically elected, such as Chan Kin-por, who was elected by 52 insurance companies in 2008. Choose a member who was elected by a geographical constituency, NOT a functional constituency.

Bills Committee on Insurance Companies (Amendment) Bill 2014
Website: http://www.legco.gov.hk/yr13-14/english/bc/bc06/general/bc06.htm
Email: bc_06_13@legco.gov.hk
List of Members: http://www.legco.gov.hk/yr13-14/english/bc/bc06/general/bc06_mem.htm
Note: These members of the LegCo are responsible for overseeing the drafting of the bill which will set up a new insurance regulator (the Independent Insurance Authority). The bill will legally require insurance intermediaries to act in the best interests of clients. Contact these guys to pressure them to make sure that the bill is not corrupted by lobbyists from the insurance industry. Pressure them to amend the bill so that the new independent regulator will be able to take consumer complaints as soon as possible. It is outrageous that victims must file complaints with organizations that represent the very companies that committed the wrongdoings.

Financial Services and Treasury Bureau (FSTB)
Website: http://www.fstb.gov.hk/fsb/iia/eng/establishment/index.htm
Email: iia_consultation@fstb.gov.hk
Phone: 3655 5088
Address: Special Duties Division, 24/F, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong
Note: Complain to the FSTB if you are unhappy with the way insurance is regulated in Hong Kong. They are responsible for setting up the new insurance regulator (the Independent Insurance Authority).

Financial Secretary
Website: http://www.fso.gov.hk/eng/role.htm
Email: fso@fso.gov.hk
Phone: Not Listed. Fax number is 2840 0569.
Address: 25/F, Central Government Offices, 2 Tim Mei Avenue, Tamar, Hong Kong
Note: If you’re unhappy about the way insurance is regulated in Hong Kong, complain to the Financial Secretary (John Tsang). “The Financial Secretary’s primary responsibility is to assist the Chief Executive in overseeing policy formulation and implementation in financial, monetary, economic, trade and employment matters.”

Laws

Section 9 of the Prevention of Bribery Ordinance (Corrupt transactions with agents)
Maximum punishment for offense is 7 years imprisonment and a fine of $500,000 HKD

Section 16A of the Theft Ordinance (Fraud)
Maximum punishment for offense is 14 years imprisonment

Section 114 of the Securities and Futures Ordinance (Restriction on Conducting Business in Regulated Activities without an Appropriate SFC License)
Maximum punishment for offense is $5 million HKD and 7 years imprisonment

Section 103 of the Securities and Futures Ordinance (Offence to issue advertisements, invitations or documents relating to investments in certain cases)
Maximum punishment for offense is $500,000 HKD and 3 years imprisonment
[NOTE: When insurance brokers distribute unauthorized funds to retail investors indirectly via portfolio bonds (the fund is technically bought by the insurance company, not the investor), it is an offense to give investors a copy of the fund’s information / marketing documents, as these documents have not been authorized by the SFC.)]

Section 36 of the Crimes Ordinance (False statutory declarations and other false statements without oath)
Maximum punishment for offense is a fine and 2 years imprisonment

Section 25 of the Organized and Serious Crimes Ordinance (Dealing with property known or believed to represent proceeds of indictable offence)
Maximum punishment for offense is a fine of $5 million HKD and 14 years imprisonment
[Note: This law is related to money laundering, which is the act of making “dirty” money (illegally gotten) appear as if it were legitimately gotten.]

Section 25A of the Organized and Serious Crimes Ordinance (Disclosure of knowledge or suspicion that property represents proceeds, etc. of indictable offence)
Maximum punishment for offense is a fine of $50,000 and 3 months imprisonment.
[Note: This law is related to money laundering. If someone (such as a bond provider) is aware of another person (such as an insurance broker) obtaining money illegally, but does not report this information to authorities, the person has committed an offense.]

Section 82 of the Inland Revenue Ordinance (Tax Evasion / Tax Fraud)
Maximum punishment for offense is $50,000 HKD fine + triple the amount evaded + 3 years imprisonment
[Note: Sources say that some insurance brokers hide fund commissions offshore to evade corporate taxes and to avoid violating Section 114 of the Securities and Futures Ordinance.] 

Hong Kong Competition Ordinance (Anti-Trust Laws)

Lawsuits

Judgement – Jeremy Hobbins vs. Skandia and Clearwater (Famous lawsuit in which undisclosed ILAS commissions were argued to be a form of bribery)

Article about the Hobbins lawsuit in the South China Morning Post: Cost in the Mists of Time

A Lawsuit in Singapore which was Settled out of Court — I visited Singapore last summer and obtained a digital copy of the court documents before this case was settled. It involved an American family who sued their financial adviser for mis-selling them an ILAS product, which caused them hundreds of thousands of US dollars of tax penalties, accounting bills, and legal bills. ILAS is a disaster for Americans. See this blog post: “American ILAS Victims Could Face Criminal Prosecution after FATCA“. Anyone interested in learning more about this lawsuit may contact me for more information (lindelll@gmail.com).

Regulations, Circulars, Codes of Conduct

SFC – 31 Oct 1996 – Introduction of ILAS Illustration Document (In Response to Complaints)

Consumer Council – 15 January 2004  – Warning for Consumers to Avoid ILAS

SFC – 23 February 2005 – Report on Selling Practices of Licensed Investment Advisers

SFC – 13 August 2009 – Clarification of ILAS Licensing Requirements

HKFI – 1 February 2010 – Code of Practice for Life Insurance Replacement

HKMA – 14 March 2011 – Enhanced ILAS Regulations

CIB – 22 July 2011 – Regulations for Brokers Selling ILAS

CIB – Code of Conduct for Insurance Brokers

MPFA – September 2012 – Code of Conduct for Registered Intermediaries

HKMA – 22 April 2013 – More Enhanced ILAS Regulations

HKFI – 22 April 2013 – Updated ILAS Regulations

SFC – 3 May 2013 – Enhance Disclosure Requirements for ILAS

Consumer Council – 16 September 2013 – Warning to Consumers about High ILAS Fees

SFC – October 2013 – Code of Conduct

HKFI – 22 October 2013 – FAQ on Updated ILAS Regulations

PIBA – 1 March 2014 – Updated Code of Conduct

OCI – 30 July 2014 – Ban on Indemnity Commissions and Unfair Charges (GN 15)

HKFI – 8 December 2014 – Updated ILAS Regulations

HKMA – 8 December 2014 – Mystery Shopping Programme Findings

HKMA – 8 December 2014 – Enhance Regulation of Non-ILAS Insurance Products

OCI – 10 December 2014 – GN 15 (Second Edition) – Ban on Indemnity and Unfair Charges

HKMA – 17 December 2014 – Update on ILAS Commission Disclosure Requirements

SFC – 22 December 2014 – Mystery Shopping Programme Findings

ILAS Victims Meeting To Be Held On January 13 at the Legislative Council Complex in Admiralty

LegCo Complex 3

Photo was borrowed from the LegCo website.

This is a notice to all ILAS victims, ILAS regulators, the ICAC, and the police. There will be an ILAS victims meeting next Tuesday at the LegCo Complex. Any victims interested in attending can email me (Lindell Lucy) for more details: lindelll@gmail.com.

The meeting is being hosted by a member of the Legislative Council who has promised to help hold regulators’ feet to the fire. This LegCo member is on the bills committee for the Insurance Companies (Amendment) Bill 2014, a bill which will establish a new insurance regulator and require insurance intermediaries to act in the best interests of clients.

So far, 16 people have confirmed that they will attend the victims meeting. Some of the victims are Chinese. Some are expats. Some were sold 25-year savings plans (aka savings scams). Others were sold unauthorized toxic funds via portfolio bonds (aka portfolio bombs).

These victims were ripped off by insurance companies including Standard Life, Zurich International, Royal Skandia, Friends Provident, Prudential, AIA, and AXA. They were ripped off by insurance brokerages including Convoy Financial Services, Centaline Financial Services, and Financial Partners.

The number of victims attending the meeting may seem small, but the number of victims throughout the city is undoubtedly gargantuan. Consider the following:

Approximately 2.5 million ILAS policies have been sold in Hong Kong over the past 14 years. There are approximately 2.5 million households in Hong Kong. On average, that is one per family.

Since 1997, insurance companies have collected well over half a trillion Hong Kong dollars in ILAS premiums.

LM Document States that the Managed Performance Fund Was “Not for Distribution to Hong Kong Public”

A source has given me a copy of a document that is sure to outrage the many LM victims based in Hong Kong. I have drawn a red arrow pointing to the key sentence:

LM MPF Bond, Platform,Trust, SIPP Providers (with Arrow)

The LM Managed Performance Fund was not for distribution to the Hong Kong public because it was not authorized by the Securities and Futures Commission. The fund should have been available only to professional investors, not the middle-class families whose lives have been wrecked.

Local brokerages such as Financial Partners, and insurance companies such as the one formerly known as Royal Skandia, have no moral defense—and probably no legal defense—for distributing the LM MPF fund to families in Hong Kong.

For readers who are not familiar with the LM scandal, take a look at the South China Morning Post article, “When an investment fund goes bad“, as well as “The LM Emails“.

Andrew Drummond’s Coverage of the LM Emails

As Martyn Terpilowski’s emails were being published on this blog, Andrew Drummond, based in Thailand, was also giving them some coverage. Links to Drummond’s stories are below. Notice that some of his readers left interesting comments.

Links

Every Victim of the LM Fund Scam Should Read This (Aug. 13, 2014)

LM Is Never Having to Say You’re Sorry (Aug. 16, 2014)

LM – Ponzi! Ponzi! Ponzi! – But Aussie Regulators Did Nothing (Aug. 20, 2014)

LM Managed Performance Fund Was For ‘Sophisticated Investors Only’ (Aug. 21, 2014)

LM Fund Client Was Able to Redeem His Investment – But He Was a Banker (Aug. 22, 2014)

Lies, Lies and More Lies – How LM Played for Time (Aug. 25, 2014)

‘What Chance Do Honest People Have?’ – How Bond Providers Turned a Blind Eye in LM Scam (Aug. 28, 2014)

About Turn? Royal London 360 Finds No Problem With LM (Aug. 29, 2014)

How the Media Unknowingly Colluded with LM (Aug. 29, 2014)

Fund Salesman Who Said LM Was ‘Highly Regulated’ Does a Belated About Turn (Sept. 3, 2014)

LM – The Appalling Offshore Stitch Up of Offshore Pensions (Sept. 5, 2014)

LM Makes Second Headline in Two Days as Lawyers Begin to Target Negligent Advisers

Click HERE to read the story. LM victims and their lawyers should take note that International Adviser has obtained a document, “which lists the names of each adviser who invested in the MPF, the firm they work for, where they are based and how much of their clients’ money was invested in the vehicle. [It] also shows 13 advisers invested more than A$5m of their clients’ money into the fund, with some investing up to A$13m or A$15m.” The existence of this document was revealed in an earlier article, entitled, “Figures reveal huge scale of LM fund sales by advisers“.

LM IA Headline

The LM Emails (#17): ACI Chairman Continued Selling LM Despite Repeated Warnings Dating Back to January 2009

“The fact that the people who sold the most of the fund now run the ACI – well what can I say… It is like ‘the fox guarding the hen house’”  -Martyn Terpilowski

Blinded by Greed

Despite numerous red flags, advisers all over the world recklessly flogged the LM Managed Performance Fund (MPF). The lucrative commissions were irresistible.

For each year that investors were locked in the fund, advisers received 3%. Thus, a three-year term paid 9%, and a five-year term paid 15%. Advisers could elect to have commissions paid upfront if they wanted (according to Peter Drake).

When the MPF was packaged in a portfolio bond, insurers paid an additional 7 to 8% upfront. Advisers could therefore lock in an immediate payout of as much as 23%, it seems.

The money did not come out of thin air. It came out of investors’ savings.

Given that LM was charging a 5% annual management fee, and the fund’s main asset was still just a scratched up piece of dirt, common sense would dictate that LM’s promised returns of up to 9% per year were unrealistic.

Unfortunately, advisers were blinded by their own greed, and investors were never told all of the facts, especially about commissions.

Simon Litster, Magellan, & the ACI

One of the most aggressive promoters of LM’s MPF fund was Magellan, an advisory firm based in Tokyo. When LM collasped, Magellan reportedly had “200 investors with a combined A$30 million locked up in various LM funds”.

One of Magellan’s directors, Simon Litster, subsequently decided to form a committee of advisers to “fight for investors”. 

Magellan first teamed up with Financial Partners of Hong Kong and then quickly recruited ten other advisory firms who had been LM supporters. The group called itself the Advisers Committee for Investors, or ACI. 

Simon Litster was nominated Chairman. Alison Pockett, Magellan’s founder and president, was designated as ACI’s European coordinator.

As of May 2014, the ACI had recruited 32 advisory firms.

Martyn Terpilowski’s Unwelcome Warnings

From 2003 to 2007, Martyn Terpilowski worked at Magellan. After leaving, he remained in contact with some of his old colleagues, including Simon Litster, Alison Pockett, and Fraser Jamieson.

In January 2009, Martyn sent them an email in which he expressed his first concerns about LM:

“Income is being paid late and things don’t redeem unless you chase, bad signs those and the words property and mortgage don’t fill me with confidence either.”

His former colleagues apparently weren’t as worried. Later that year, Peter Drake told Martyn that Magellan was still a strong supporter of LM.

Martyn wrote to Simon Lister again in December 2009 and forwarded him several emails he’d sent to LM sales manager, Heather McLeash. (Those emails have been published here.)

Martyn warned Litster about major redemption problems, the fact that Drake had lied about those problems, and other facts which suggested that LM was operating like a Ponzi scheme. He invited Litster to call him to discuss the issues further. Litster had zero interest or concern. He replied:

“I will not be calling you to discuss this. If [your firm] choose not to market LM funds then that is their decision…magellan can make it’s own decisions.”

Martyn responded:

if you chose to believe everything [LM says] against what Doctor Doom says so be it – it really does not affect me.

Let’s see then mate – but this has been documented and enough people know about what we know. If this goes wrong, there are no excuses for any of us.

I reiterate I am seriously worried.

Doctor Doom was a nickname Martyn had earned from frequently predicting that suspicious-looking investment schemes were headed for trouble. He was usually correct.

Doctor Doom Is Proved Correct Once Again

Four years after Martyn’s first warnings, LM collapsed. Most observers concluded that the MPF was a fraud. Asset values were grossly overvalued, and redemption payments and income distributions seemed to have been paid with new investors’ money, just like a Ponzi scheme.

Litster sent Martyn an email a few months after LM’s collapse, but it wasn’t to apologize for his earlier conduct. Instead, Litster mentioned that he had been nominated chairman of the ACI, and he wanted to know if Martyn had the contact info of another firm that had sold LM pre-2009.

Litster showed no apparent signs of guilt or shame. If anything, he seemed to be slightly proud of his nomination as chairman.

Martyn was so angry he had to wait till the next day to respond:

“for you and Alison…to now come in acting like the white knight is quite ridiculous…I warned you in a friendly way a few years ago and your response was quite damning.”

Litster didn’t reply to Martyn’s email, and they haven’t spoken since.

ACI’s Hypocritical Blame Game

Since its establishment, the ACI has been focusing most of its energy on blaming Peter Drake and the Australian regulators—and deflecting attention away from advisers’ negligence.

In an interview with the South China Morning Post, Simon Litster admitted that Magellan “knew about problems with the Managed Performance Fund in 2009.” However, “Magellan continued to sell [MPF] into 2012 because LM provided reassurances…including audited reports.”

Litster’s statements suggest that Magellan and others continued selling LM because Peter Drake had bought their trust. They didn’t bother using common sense or questioning the information that Drake provided, as this would have required a small amount of effort and resulted in a pay cut.

Martyn Terpilowski summed it up just one week before LM collapsed: “I realise that the old big upfront commissions are still convincing some brokers to invest money with a company with so many problems… the questions would have to be – why else would u choose LM? I mean there are other alternatives”.

In April 2014, the ACI put on a big show, loudly complaining to the Australian Senate, demanding an investigation into the conduct of ASIC, the Australian regulator.

One ACI member hypocritically stated:

“I have been left feeling incredibly frustrated, disappointed and let down by ASIC, who had knowledge of Peter Drake and the LM disaster looming months before it happened in March 2013. Had ASIC stepped in far earlier, large losses to some clients could have been avoided. I find this borderline criminal negligence in itself.”

Certainly ASIC isn’t blameless, but when ACI members masquerade as innocent bystanders, they are only fooling themselves.

“These clowns really are full of sh1t.”
-Martyn Terpilowski

January 2009

Martyn Terpilowski

From: Martyn Terpilowski
Sent: 18 January 2009 13:14
To: ‘Alison Pockett’; ‘Simon Litster’; ‘Fraser Jamieson’
Subject: Property updates
Importance: High 

Dear All,

I am not trying to cause trouble here and I realise we are all in the middle of a complete disaster but clients are getting increasingly annoyed on lack of updates on failed property investments. I can help with Coco and Edge as an investor myself so have the info, but they are not getting any updates on Dubai Marina or Ropewalk etc. [A client] is livid and I did mail you a few weeks ago, but he has still heard nothing. I am happy to help but you will not give me the info, just telling me that they should go through you.

understand with your JPY [Japanese Yen] and Property exposure this must be an awful time – it is awful for me and I am not as exposed. The perfect storm as warned by Doctor Doom has occurred worse than he could have predicted.. JPY loans – I do know now what was I thinking when I look at a 10 chart!!! Oh well we learn…

I have concerns for LM also FYI. Income is being paid late and things don’t redeem unless you chase, bad signs those and the words property and mortgage don’t fill me with confidence either. [XXXX] told me Brandeaux would never stop redemptions in November as they are not property related!!!!!! I don’t trust any of them. Any smaller fund house – look at Castlestone and FMG – terrible.

Anyway – not to darken the start to your week – but the updates on property is essential as clients are not hearing and blaming me which is not fair!!!. As I said I am happy to help if you let me.

Good luck.

Martyn

December 2009

Martyn Terpilowski

From: Martyn Terpilowski
Sent: 16 December 2009 09:42
To: ‘Simon Litster’
Subject: FW: Hello Heather

Hi Simon

I hope that you are well.. Just a very quick one, but please see mail below I sent to Heather at LM. You do not have to listen to me, but there is something very wrong here for the reasons I have explained below. Putting money into a fund when you cannot get your money out is wrong and money they are getting in is clearly being used to pay redemptions, which is very wrong.

Peter Drake no longer likes me, like Alan Sadd did not for years before everyone else, Kamran Mahmood too.. but Doctor Doom was spot on with nearly everything (JPY loans!!!!)– just wish he had followed his own advice.

This is just FYI anyway as Peter seems to be holding you guys up as great supporters. I do not think that is a good space to be at all.

Have a good Xmas

Martyn

Simon Lister

From: Simon Litster
Sent: Wednesday, December 16, 2009 10:51 AM
To: Martyn Terpilowski
Subject: RE: Hello Heather

Martyn.

I have not forwarded your mail to AP [Alison Pockett] but i will discuss your concerns with FJ [Fraser Jamieson]. How do you know redemptions are being met with new money coming in?

S

Martyn Terpilowski

From: Martyn Terpilowski
Sent: 16 December 2009 11:08
To: ‘Simon Litster’
Subject: RE: Hello Heather

Simon

Give me a call. It is obvious. They have no redemptions right now – indefinitely ([Client 2] has been waiting since May after putting request in, in Jan). Do you think when money comes in, they invest that money, whilst trying to free up other assets to pay redemptions? Obviously not. That is the hallmarks of a Ponze scheme and that has been very obvious for sometime, I have told FJ already, he seems like he wishes not to know. Gteed problems here – I will fwd you the next mail I sent. It really matters little to me – we have not dealt with them for several months now and I am very worried.

Rgds

Martyn

Martyn Terpilowski

From: Martyn Terpilowski
Sent: 16 December 2009 11:11
To: ‘Simon Litster’
Subject: FW: Hello Heather

Please see below and yes you read right Peter Drake stated that he was ‘lying for the greater good’ like Richard Nixon – when he did not make it clear on redemptions earlier.

Simon – surely you are not saying to clients – ‘Invest in this, great return (mortgates and property!!!!),  but is currently closed for redemptions’ are you? So someone is being mislead. Great sales skills though.

Rgds

Martyn

Simon Litster

From: Simon Litster
Sent: Wednesday, December 16, 2009 11:18 AM
To: Martyn Terpilowski
Subject: RE: Hello Heather

Martyn.

I am reading this from home as I am off today for my son’s birthday party. I will not be calling you to discuss this. If [your firm] choose not to market LM funds then that is their decision. Happy to listen to logic and facts and magellan can make it’s own decisions. Don’t however comments like  Invest in this, great return (mortgates and property!!!!),  but is currently closed for redemptions’ are you? So someone is being mislead. Great sales skills though” does not endear you to me or us to be honest. If you continue to make such sweeping statements then please keep your opinions to yourself.

Simon

Martyn Terpilowski

From: Martyn Terpilowski
Sent: Wednesday, December 16, 2009 12:07 PM
To: ‘Simon Litster’
Subject: RE: Hello Heather

Ok Simon.

I have given my logic and the facts, which are in fact very clear. I was not trying to endear myself to you or Magellan – I was trying to help you all. I recently heard from a customer that Magellan are still promoting LM strongly and they were pretty amazed as they were aware of redemption suspensions. I actually cared. None of my statements are sweeping at all – they are all based on facts and clear information. It is ethically incorrect to take money into a fund, where redemptions are suspended. Fact. I am sure that a few years ago, you would have been happy to say that about other companies. It is also very clear that the new money coming in, is being used for redemptions. Again, not sweeping, but obvious. It is also clear that surely this is not being made clear to clients. Again not sweeping, but obvious.

I do not understand how this can be seen any other way. After all the problems we have all had with funds closing and [delayed redemption] shares etc, I would have thought we would all be adopting an initial view of caution on things like this. After all LM have lied all ready about redemptions and the CEO has quoted Richard Nixon of all people (again Fact), so if you chose to believe everything they say against what Doctor Doom says so be it – it really does not affect me.

Let’s see then mate – but this has been documented and enough people know about what we know. If this goes wrong, there are no excuses for any of us.

I reiterate I am seriously worried.

Have a great Xmas.

Cheers

Martyn

October 2011

Martyn Terpilowski

From: Martyn Terpilowski
Sent: Saturday, October 01, 2011 11:54 AM
To: ‘Simon Litster’
Subject: and between me and you

Where do u think Porton is going mate? You are probably aware there is lots of anger brewing about that now also as FJ has sold the back out of it. We are all aware of the insane commissions they were paying and I am very surprised that did get alarm bells ringing… This has gone on for years and if these technologies were so good they would have been sold mate and we all know that and investors would have received some money back. We now have the farcical legal case when 3M are saying Acolyte did not work (why would they say that if not true?) and Harvey Boulter trying to blackmail them. As this appears to be the only technology they have ever sold, I do not think it bodes well…. I think FJ may really regret his boast to me at the [Azabujuban] festival last year that he had still done $1m already….. yes at 15% commission…(he also said I would sell nothing with my attitude)… I guess that was desperation because of all the other business going wrong, but there is definitely trouble brewing here also and this will be worse..

I know u get p1ssed when I say things like this like when I said about LM last yr, but I was trying to help as people like [my client] were going nuts that it was being sold when his money was locked in (and still is)…Now everyone is talking about [Porton Capital]….. I am not being Doctor Doom….

Have a great weekend.

Martyn

June 2013

Simon Litster

From: Simon Litster
Sent: 27 June 2013 21:05
To: Martyn Terpilowski
Subject: LM and ACI

Martyn.

Who do I contact at [XXXX] about joining the ACI (Advisers Committee for Investors)? You may have heard we are deeply involved and I was nominated Chairman. I am co-ordinating brokers in Japan.

Thanks.

Simon

Simon Litster
Senior Partner
MAGELLAN
The Financial Planning Company
Website: www.magellanfp.com

Martyn Terpilowski

From: “Martyn Terpilowski”

Date: 28 June, 2013 10:51:16 am GMT+8
To: Simon Litster
Subject: LM

Simon

Sorry I could not control my anger last night but could not actually believe what I was reading. I have kept quiet on this with you guys so far as did not want to waste my energy, but for you and Alison (or [Financial Partners] in HK for that matter) to now come in acting like the white knight is quite ridiculous. For 3 years I have been battling with LM for my clients money back, all that time brokers have been lining their pockets selling this due to the insane commission levels. I warned you in a friendly way a few years ago and your response was quite damning. I wrote to the regulator and all bond providers telling of my concerns and everyone ignored me. Lets be clear, this was a huge fraud where LM teamed up with brokers and it was facilitated by the life companies who continued to accept this despite numerous warnings. The fund had far less interest from brokers when it paid 3 [percent] and could not be put in a bond. The fund at that stage was far more stable also. During this time despite major financial problems, I stuck to my principals and never sold it, whilst desperately trying to get clients money out. It made no sense and the only reason ppl were placing money there was for commissions which was 16pc in a bond [9% LM + 7% bond], so how was the client ever going to win? During this time I met a very arrogant Fraser telling me how well he doing.. Well anyone could do well selling this and Porton. I really hope it is finally catching up with him. It is very depressing, but the offshore industry is disgusting and the few people I used to respect, have been involved with this. I don’t believe I am the only person who knew this was going to happen, but am one of the few who stuck to their principals. I actually think this was theft and brokers should be brought to account also. I have sent many emails to KordaMentha, documenting my long term concerns and emails proving that I had told the regulator, the life offices and some brokers of my concerns. Everyone just carried on. Now I have to face all these people who made so much money, pretending they were duped too and are setting up committees. This even includes ex LM employees. It is just unbelievable. Sadly that group will be far bigger than my group, due to the nature of this industry. I am mortified for [my clients], but they know I have been fighting for them a long time, since my concerns started.

The people I talk to who bought this from Fraser should also be aware, that he was warned. The people who sold this in the last few years since commission levels were increased, should be brought to account and not be able to act as if they are shocked and there to help. I know I am Doctor Doom.. Just waiting for Porton.

I desperately want out of this terrible industry and I want the world to know how bad it really is.

Rgds
Martyn

Sent from my iPhone