Tamsyn Parker

Tamsyn Parker is the NZ Herald's Money Editor

$60m good news: investor

Commerce Commission reaches deal with firms that set up failed Credit SaILS fund.

NZX chief executive Tim Bennett. Photo / Greg Bowker
NZX chief executive Tim Bennett. Photo / Greg Bowker

Investors have welcomed a $60 million settlement over the failed Credit SaILS investment fund but some say the payout should have come sooner.

The Commerce Commission yesterday said it had reached a deal with five companies involved in establishing the scheme, including New Zealand brokers Forsyth Barr, to set up a fund for more than 3000 investors affected by the collapse.

Credit SaILS was a complicated debt security sold to the public in 2006 with the prospect of 8.5 per cent return and capital protection. The NZX-listed product raised $91.5 million but failed in 2008 and is now virtually worthless.

One Auckland investor who had $50,000 in the scheme said the settlement was very good news. "I'm delighted. I wasn't expecting quite as much; a while ago I didn't think I was going to get anything."

But Greg Marshall, chief executive of Logic Funds Management which had been fighting for compensation on behalf of 850 investors, said the deal was too little, too late.

"It's been a long three years."

Marshall said some investors had died in that time and others had been significantly impacted by the loss of life savings.

Marshall said investors should have got all their money back plus interest and believed legal action should have been taken.

Commerce Commission chairman Mark Berry said the commission had reached the view Credit SaILS was marketed and sold in a way likely to have breached the Fair Trading Act.

"In our view there were sufficient grounds to file legal proceedings under the Fair Trading Act against the companies who promoted and sold Credit SaILS."

But he said the legal action would probably have been lengthy and costly with no certainty of a successful outcome.

Under the settlement, investors will receive about $850 for every $1000 they invested in Credit SaILS. Without the deal, they would only have received about $20 from their $1000, the commission said.

The $60 million is being put up by Forsyth Barr Limited, Forsyth Barr Group Limited as well as investment bank Credit Agricole Corporate, Credit Sail Limited and Calyon Hong Kong Limited.

A Forsyth Barr spokesman said how much each company was paying would remain confidential.

Forsyth Barr managing director Neil Paviour-Smith, who is also a director for NZX, the stock exchange operator, said the firm always believed it had complied with the Fair Trading Act.

No worries over broker

NZX boss Tim Bennett says he has no concerns about Forsyth Barr's capital position after its role in a $60 million settlement.

The broker and a related business are two of five companies involved in a payout to investors in the failed Credit SaILS product.

Bennett said he contacted Forsyth Barr yesterday over the settlement.

"We obviously have a set of rules for both trading and clearing participants and Forsyth Barr is both of those."

If a firm's cash levels drop below 120 per cent of its capital requirements it must report to the NZX daily. But Bennett said he had been assured Forsyth Barr was not in that situation.

- NZ Herald

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