Record compensation deal reached for thousands of misled investors

News - Banking

Written by Ray Clancy

Tuesday, 22 June 2010 10:00

New Zealand’s competition watchdog has secured a record compensation deal for thousands of investors over allegations that ANZ National Bank and ING misrepresented the risk involved in two retail funds.

A total of NZ$45 million will be paid to investors affected by the freezing of two ING funds in March 2008, in return for waiving legal action, the Commerce Commission said.

At the time they were frozen, the funds were worth about NZ$533 million and together had around 15,000 individual investors.

The commission investigated alleged breaches of the Fair Trading Act relating to the marketing and promotion of the funds by ING and ANZ. ANZ and ING had said ING’s diversified yield and regular income funds were a safe investment and collected around NZ$700 million from investors.

‘In the Commission’s view, representations made by ANZ and ING concerning the degree of investment risk in the funds were likely to be misleading in that the actual risk was understated,’ said Commerce Commission chairman Mark Berry.

‘After careful consideration, the commission believes that this settlement serves the best interests of New Zealand consumers and the affected investors in particular who in many cases stood to lose part of their life savings,’ he added.

ANZ, which owns the New Zealand business of Dutch financial group ING has said it already made available more than NZ$500 million to investors in the funds after it offered a settlement in 2009.

‘We apologise to those investors who felt we had misinformed them,’ said ANZ National Bank’s acting chief executive Steven Fyfe. ‘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,’ Fyfe added.

The bank has also agreed to reimburse the consumer watchdog for the $1 million cost of the complex investigation.

However, as ANZ and ING did not accept all the commission’s findings, the amount would not necessarily cover all the money owed to investors. Almost all the investors have accepted an offer from ING for 60 cents in the dollar for funds invested in the diversified yield fund, and 62 cents in the regular income fund, or about $500 million in total.

It is understood that about 100 investors have already received all their money back after the banking ombudsman became involved. The rest are likely to receive the money within five months.