BNZ, liquidator taking NZX to court

The Bank of New Zealand and liquidators Ferrier Hodgson are taking sharemarket operator New Zealand Exchange and accountants Deloitte Touche Tohmatsu to court over last year's Access Brokerage collapse.

BNZ and Ferrier Hodgson said yesterday that NZX and Deloitte inspections of Access' books should have raised concerns long before the online sharetrader went belly up a year ago owing clients nearly $5 million.

BNZ is seeking up to $4.8 million from the two companies for money it paid out to Access clients after its failure to make up a shortfall in its client trust account, while Ferrier Hodgson also wants a further $400,000 in claims associated with the wind-up of the company.

NZX, which placed its own shares in a trading halt before BNZ and Ferrier Hodgson's announcement, said it "strongly denies the claims and that it has any liability for them whatsoever ... In any event NZX has insurance".

Former Access managing director Peter Marshall is facing 15 false accounting charges in relation to the Access collapse after a Serious Fraud Office investigation. NZX's enforcement body NZX Discipline is also taking proceedings against Marshall.

In a statement to the market, NZX head of regulation Elaine Campbell said NZX's interest had always been to protect investors and it "remains proud of its prompt and effective discharge of its frontline regulatory duties".

She said BNZ and NZX jointly underwrote the shortfall in client funds in Access' BNZ trust account, "at the prompting of NZX", and as a consequence no investor lost money. BNZ met about $4.3 million of the $4.8 million shortfall while NZX paid $460,000 out of its fidelity fund.

"NZX believes that the claim is motivated by the fact that BNZ is carrying an outstanding liability for money it paid out to Access and that it is seeking to offload that liability on to NZX," said Campbell.

In its half-year result issued last month, NZX disclosed the Access collapse had cost it $344,000 in the six months to June, on top of $500,000 last year. It expected those costs to continue to mount.

Deloitte declined to comment yesterday.

BNZ general counsel Mark Dowland said the bank believed Deloitte and NZX "failed to carry out with reasonable skill and care their duties to inspect Access Brokerage and to ensure that Access was meeting its obligations under the stock exchange's rules relating to the protection and preservation of investors' funds".

BNZ argued that if Deloitte and NZX had carried out their duties properly the losses eventually suffered by investors would not have occurred.

Brendon Gibson, of Ferrier Hodgson, said Deloitte failed to notice "significant indicators of trouble in the Access accounts between 2000 and 2002" while the allegations against NZX related particularly to its August 2003 inspection which identified issues around compliance with trust accounting obligations.

NZX shares closed 20c lower at $7.30 last night.

The action

September 3, 2004: Access Brokerage's majority owner Bill Garlick tells NZX his firm is in trouble.

September 6: Access goes into liquidation after a $5 million deficit in client funds is uncovered.

September 13: The Securities Commission launches an inquiry into the collapse.

September 15: Liquidator Ferrier Hodgson's initial report shows the firm ran on client funds for some time, leading to the shortfall in those funds. BNZ offers to cover that.

April 8, 2005: Second report by Ferrier Hodgson finds Access' problems may date back as far as 1998.

April 14: NZX charges Access Brokerage and former managing director Peter Marshall with breaching rules.

May 10: Serious Fraud Office charges Marshall on 13 counts of false accounting and two of making false statements.

August 29: Marshall remanded until a depositions hearing beginning February 27 next year.