Moral victory for investors; financial victory for ANZ

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Frozen Funds Group says the ANZ $45 million settlement is a moral victory for investors, but a financial victory for ANZ which only has to pay out additional compensation of 6c to 10c in the dollar.

Wednesday, June 23rd 2010, 12:10PM 1 Comment

by Jenha White

The regulator alleges that the promotion of the degree of investment risk in the ING Diversified Yield and Regular Income Funds was "misleading" and that there was sufficient evidence to pursue proceedings against both ING and ANZ for breaching the Fair Trading Act.

The regulator decided against this course of action, saying the settlement was the best outcome for investors in the funds.

ANZ National Bank Limited Acting Chief Executive, Steven Fyfe said: "While we do not agree with all of the Commission's views we do agree that it is in the best interests of investors to avoid a lengthy court process".

Frozen Funds trustee Gerard Prinsen says while the news of settlement has been highlighted as a record amount, in reality the 15,000 investors who put $700 million into ANZ ING funds are only getting an additional 6c to 10c in the dollar back.

He says Frozen Funds is now meeting over the next couple of days with its 13 local groups of investors, MPs and with advisers to come up with a detailed strategy of what it will do next.

Frozen Funds trustee Andrew Davidson says people should be able to invest with confidence knowing they are not going to be misled and if they are, that they will be able to get fully compensated.

"I believe this falls a long way short of instilling confidence in people to invest in financial markets in New Zealand.

"The message the settlement has given is that if you are a big business in New Zealand and you mislead people with sales, you can get away with it."

Davidson was also concerned that the Commerce Commission decision would affect Banking Ombudsmen decisions.

Banking Ombudsman Deborah Battell says ANZ National Bank customers whose complaints about the failed ING products are being considered by the Banking Ombudsman are advised to continue with this process.

She says although the Commerce Commission has announced that it has signed a deed of settlement with ANZ National and ING in respect of the failed ING investments, she has been advised that this Deed will not replace the work of the Banking Ombudsman.

"Similarly, we have been advised that the Banking Ombudsman's decisions will not disadvantage ANZ customers in terms of any potential for further payouts arising from the settlement."

According to the Commerce Commission those investors who withdrew from the funds before they were frozen in March 2008 will not be eligible.

 The Commerce Commission has also said that, when considering how the $45 million payout will be apportioned, it "may take into account whether investors have already been made right, and to what degree, by ANZN, or through remedial actions taken by the Banking Ombudsman, or through tax adjustments".

Battell says the Banking Ombudsman has always been clear with complainants that the question of whether the funds were misrepresented in the investment statement was a matter for the Commerce Commission to investigate.

"We have looked at whether there was any evidence in individual cases of misrepresentations outside of the investment statement, whether investors received an appropriate service from their financial advisers and whether the products, as represented, were appropriate for investors and whether they had an appropriate proportion of their investment savings in these products."

Battell says she is pleased that the Commission and ANZ National have reached a settlement, and that affected investors will soon have greater clarity as to the full extent of any refund due to them.

The Banking Ombudsman received 680 cases for assessment from ANZ customers. To date 458 cases have been completed; a further 122 are under active investigation and 101 cases are waiting to be assigned. All cases are expected to have been assessed within the next five months.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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