The chief of embattled financial advisory firm Prosperity Advisers Group has denied it is facing claims of $77 million over activities by one of its businesses, stating a more accurate figure is less than $10 million.
Allan McKeown told InvestorDaily that reports Prosperity was facing claims that could amount to around $77 million were “grossly exaggerated”.
McKeown said $1.4 million in claims had been determined, with claims for about a further $8 million received.
He said the directors of the chartered accounting and wealth management group last year had appointed a voluntary administrator to the legally separate accounting and financial planning business based in Newcastle.
“Voluntary administration is a formal legal process that has enabled us to isolate the claims and insurance issues in that entity,” he said.
The business in question had a number of financial planning claims brought against it after recommending products that were on Prosperity’s approved product list (APL) prior to December 2005 and which had subsequently failed, he said.
The claims all related to advice given between 2004 and 2005, and represented a small percentage of Prosperity’s client base, he said.
“We removed this style of investment from our APL in early 2006 and accordingly financial services complaints have been negligible since that time,” he said.
The appointment of a voluntary administrator to the Newcastle practice had no impact on other businesses within the group, including Prosperity’s Sydney, Brisbane and audit and salary packaging businesses, he said.
The group expects matters to be resolved soon.
McKeown said Prosperity was also well advanced in a case against its professional indemnity insurer in the New South Wales Supreme Court as the company had initially been granted indemnity for the claims but its insurer had subsequently withdrawn cover.
He said the group was disappointed its insurer had sought to avoid responsibility on what he considered a technicality and that claims otherwise would have been settled long ago.
“We expect the matter [with our insurer] to be heard mid to late this year,” he said.
“In the meantime, in the absence of insurance cover, 10 complaints have been determined by the Financial Ombudsman Service and there are others being considered.”
He said Prosperity had not made any redundancies and prior to being authorised to act as a corporate authorised representative of dealer group Premium Wealth Management in March 2010 was a self-licensed group.
Prosperity had reached an in-principle agreement to replace Premium as its dealer group, a change that would have no affect on its day-to-day dealings, he said.
A Premium spokesperson confirmed the relationship with Prosperity would be terminated under the terms of agreement and that as the dealer group had no legal relationship with Prosperity, Premium was not a party to any legal claims against Prosperity.
