Insurers continue to do business with brokers

Masterton broking firm Morison Guildford, which was heavily criticised in a recent Securities Commission report, still has agency agreements with at least three insurers, though the insurers say the relationships are under review.

AXA, whose products have been sold by the firm for several years, said it was reviewing the commission’s report, but declined comment on whether it might terminate the agency agreement.

Royal & SunAlliance said its head of sales was looking into the matter. The company’s standard agency agreement required agents to comply with all relevant statutes and codes of practice, a spokeswoman said.

Tower also said it would be reviewing the agency agreement, adding that the firm had sold very few of its products.

Sovereign, whose products Morison Guildford are said to have sold, has yet to confirm whether the firm still has an active agency agreement.

Morison Guildford, which is run by Andrew Morison and Michael Guildford copped flak in the report for promoting what Securities Commission chairman Jane Diplock described as an illegal "scam" investment scheme.

The fund in question, Gideon Investments Pty, was run out of Sydney by New Zealand-born Michael Bastion, who died in early 2000.

It was claiming returns of up to 51.5% annually, and was said to have invested in horses, funds management, dealing, investments gaming and entertainment.

In reality Gideon was using much of the money for his own purposes.

Of the $5.3 million invested by New Zealanders in Gideon, about A$5 million was collected by Morison and Guildford.

The commission also criticised them for withdrawing investors’ money for their personal use in questionable circumstances.

It also expressed concern about a $368,000 payment made from the fund to Morison, Guildford and other shareholders in their agency for a 24% stake in their business. A BNZ memo suggested a quarter stake in the company was worth only $120,000, it said.

The agents also borrowed $87,000 from the fund, seemingly without proper documentation, and against rules contained in the fund’s management agreement.

The commission said questions of liability arose from Morison Guildford’s possible role as an investment broker for the scam fund. These matters had been referred to the Registrar of Companies for his further consideration, it said.