Major financial groups have been drawn into legal action by beleaguered hedge fund manager Basis Capital Funds Management (Basis Capital) to claw back money for investors stung by the sub-prime mortgage meltdown.
Basis Capital has begun proceedings in the New South Wales Supreme Court to determine the rights of investors who had their attempts to retrieve money in the Basis Aust-Rim Opportunity Fund and the Basis Yield Fund denied by the hedge fund last year.
Westpac’s BT Financial Group (BT) has agreed to act as the lead defendant for all investors and financial advisers who made applications in June 2007 when Basis suspended transactions.
According to court documents Permanent Trustees Australia has been named as a second defendant.
The group, which is the trustee for the Commonwealth Bank of Australia’s wholesale wrap provider Avanteos, will represent those investors who tried to redeem their funds by July 2.
ANZ Nominees will act on behalf of James Packer-backed fund manager Challenger, who had exposure to Basis through its Synergy platform.
Challenger will take up the case of continuing investors in the funds.
The investors had funds in high-yield corporate and structured credit securities, including mortgage-backed bonds and collateralised-debt obligations that plunged value when the United States housing crisis struck.
The Investment and Financial Services Association (IFSA) has taken the unusual step of gathering key members together to determine an industry position and lessen the potential cost of the court action.
BT, Macquarie Group and St George’s Asgard Wealth Solutions, and others, are involved in a working group led by IFSA chief executive Richard Gilbert.
The court application will be heard on March 3 in Sydney.
On Wednesday a United States federal court judge rejected a bid by the hedge fund manager to apply for bankruptcy for one of its funds registered in the Cayman Islands.
