The Securities Commission is investigating disclosures made during the 2006 promotion and sale of $91.5 million of index-linked notes known as Credit Sails, which are now worthless.
The notes were backed by a portfolio of corporate debt from 125 firms, and came unstuck as the global financial crisis knocked out
portfolio members including Lehman Brothers, Washington Mutual, three banks in Iceland and Idearc, the publisher of America's Yellow Pages.
Credit Sails were promoted by Calyon Hong Kong, a unit of what is now French banking group Credit Agricole. Brokerage Forsyth Barr managed the sale.
The investigation is mentioned in the 2010 annual report of Cayman Islands-registered Credit Sail and is in addition to a probe already underway by the Commerce Commission.
A spokesman for the Securities Commission confirmed the regulator is looking into disclosure issues and declined further comment.
The Commerce Commission also confirmed an investigation while making no comment.
"The investigations are at a very early stage and it is not possible to predict the outcome," Credit Sail says in the notes to its financial statements.
"However, there is a risk that the investigations could result in either criminal or civil proceedings against the company under the Fair Trading Act and/or the Securities Act."
There was also a risk that investors in the Credit Sails "may seek to bring civil claims for compensation or damages against the company," it said.
No proceedings had been threatened or made that the company was aware of, it said.
The notes mature on December 22, 2012. Before they defaulted, they were paying annual interest of 8.5 per cent and had a credit rating with Standard & Poor's of AA.
