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Bridgecorp founder Rod Petricevic has been sacked by the company's receivers who have also put his luxury launch up for sale as details emerge about the high fees the company offered financial advisers in a desperate attempt to stave off its collapse.
Bridgecorp's failure last week left 18,000
investors owed about $500 million, and receivers John Waller and Colin McCloy are working their way through the company's complex affairs which involve about 60 loans worth about $400 million. They said it would be several weeks before they had determined the true position.
McCloy yesterday confirmed that 13 senior staff at the company, including Petricevic and finance director Rob Roest, had been found "surplus to requirements". Petricevic remained "willing to assist us when required".
Roest has also now resigned from the board of Compass Capital, the mortgage trust set up last year which bought several better-performing loans from Bridgecorp, which remains its ultimate beneficiary.
Waller said two companies within the Bridgecorp group had now been placed in liquidation. They were Bridgecorp Investments and Poseidon, which operated the luxury launch The Medici that Petricevic used.
The launch, which is moored at the Viaduct Harbour, would now be sold.
Meanwhile, industry insiders say Bridgecorp's offer of increased brokerage to financial advisers for putting client cash into the company's debenture stock should have been a clear warning sign that the company was in a desperate condition as early as January.
As reported last week by the Business Herald, Bridgecorp raised its brokerage - the fee paid to advisers - to double that paid by most of its rivals as it sought to boost flagging investor inflows.
Kapiti Coast financial adviser Chris Lee said he and other advisers had received letters from Bridgecorp this year offering them 3 per cent brokerage on three-year money put into the company's debenture stock when the industry standard was about 1.5 per cent.
The Business Herald understands Bridgecorp began offering increased brokerage in January or possibly even earlier.
The company's December half-year financial information showed the company was being starved of new funds late last year with inflows from investors falling to $49.6 million from $88.7 million a year earlier.
Chris Stone of McDouall Stuart Securities, which produces analysis on the finance company sector, said unusually high brokerage was "a pretty good lead indicator" a company was in trouble.
Stone said the increase should have been a warning signal to any competent professional adviser.
"I would have thought what does this all mean? Why do they like me more than they did last week?"
It is believed Bridgecorp had struck difficulties in meeting its repayments of interest and principal to existing investors for some time. The Business Herald understands a loan last year from Wellington-based finance company St Laurence was used to meet September quarter interest and principal payments.
Meanwhile, Lee said advisers who had put client money into Bridgecorp but had not disclosed the level of brokerage they received could face legal proceedings from investors.
Stone said it was in advisers' interest to disclose all fees.
"They're actually vulnerable if they are not seen to be acting in the best interests in their client. To not disclose there is a higher fee for a particular investment, I think that would raise a question or two."
Chief executive of the Institute of Financial Advisers, David Hutton, said his organisation had a code of ethics that required all fees to be disclosed to clients. However it only represented a portion of New Zealand's advisers.
