The Financial Markets Authority has confirmed it is investigating an unspecified number of advisers in relation to the company, which was run by Authorised Financial Adviser David Ross.

“FMA is aware that a small number of clients invested with Ross Asset Management on the basis of a recommendation by another financial adviser,” an FMA spokesman said.

“We are actively engaging with those advisers and will take appropriate action where, after investigation, any breaches are discovered.”
Investor spokesman Bruce Tichbon said he had been contacted by investors who said they were recommended to David Ross by “high-profile financial advisers around the country”.

Tichbon declined to name any of the advisers but said he’d heard “large names to small names” in conversations with investors.

“The people who’ve been particularly motivated to ring me have been those that were recommended by a financial adviser or those who put a large amount of money in at the end.”

Corporate lawyer and fund manager Brian Henry, who represented Carey Church in the Armitage v Church case, said the situation was “looking very ugly” for financial advisers.

He predicted lawsuits similar to those that followed the finance company collapse, but he said advisers who recommended Ross would have an even harder time defending themselves.

“The obligation of the investment adviser is quite clear in case law: they must become familiar with and understand the investment they are advising on.   They look at published accounts, audited reports, trustee action, reaction or non-action, the prospectus and investment statement.

“These are the base documents when they start looking; they still have to use their brains, smarts and common sense on top of this statutory base.  With this guy they have no statutory base to start from.”

And Henry said affected advisers might not even be covered by their professional indemnity policies.

“They will not cover those advisers if the loss has been caused by diminution of value of the asset and not by negligence.  If they can say the asset was absolutely stolen and was total theft they might be able to get a pay-out.”