Investors 'victims' in Feltex settlement

The settlement this week of a sharemarket investigation into embattled carpet-maker Feltex sets an unwelcome precedent, says Brook Asset Management director Simon Botherway.

"For a company to be in a position to pay a mere $150,000 and escape any more serious findings, then that's just not acceptable," Botherway said yesterday. "You wonder whether ... companies will look at that and go, 'Gosh we know what the rules are, but bending them or breaking them isn't going to cost us a whole bundle'."

NZX Regulation found this week that Feltex had failed to warn investors early enough about its profit drop last year.

Feltex did not admit to any liability but agreed to pay at least $150,000 to NZX Discipline to put an end to the investigation.

Botherway said the settlement had robbed shareholders of the opportunity to hold the company to account.

"If there were some findings then shareholders would be able to address those issues with the management and the board, and insist on some remedies."

The $150,000 settlement was a slap in the face for shareholders who ultimately, as owners of the company, would pay the money.

Macquarie Equities investment director Arthur Lim said shareholders had to accept the payout as a side-effect of investing in a listed company.

"These are the rules by which the market is run but I think there is definitely concern that shareholders in Feltex, who are the ones that actually suffered the most, are unfortunately effectively paying the fine."

Asked whether directors rather than companies should pay in investigations, NZX chief executive Mark Weldon said the market should be thought of as an ecology.

"What all people who are engaged in positions of responsibility at all companies need to understand is what are the consequences of certain things," Weldon said. "You've got to look at this as signals for the long run ... "

Bruce Sheppard, the chairman of the Shareholders Association, said the shareholders were the victims and effectively paying the settlement.

"Is there something insidious in this, is there something that's just reprehensibly stupid in it?" he asked.

He said investigations would make more sense if directed towards individual directors rather than companies.

Feltex did not comment yesterday.

- additional reporting Stephen Ward