KEY POINTS:
The ANZ bank and fund manager ING are being investigated over potential breaches of the Fair Trading Act in their marketing of a troubled investment fund.
Competition watchdog the Commerce Commission has confirmed it's investigating the two financial institutions over the way ING's Diversified Yield Fund was represented to potential customers.
Both ANZ and ING have come in for heavy criticism following the freezing of the Diversified Yield and Regular Income Funds in March. The move left 8000 investors unable to access total investments worth $521 million.
The two funds invested in collateralised debt obligations (CDOs) and collateralised loan obligations (CLOs), financial products which package various types of debt into tradeable securities. The market for these products vanished with the credit crisis.
The freeze sparked a string of complaints to the Banking Ombudsman. The Commerce Commission says it's acting on information forwarded by the Banking Ombudsman and following several complaints.
ANZ owns 49 per cent of ING New Zealand and actively promoted the funds to customers through its network of financial advisers.
ANZ customers have reported that they were told the investments were "as safe as the bank". They also say they were not informed about the link between ANZ and ING.
The bank has been forced to settle with a number of investors.
In one case it paid out more than $200,000 to an elderly woman whose life savings were tied up in the Diversified Yield Fund. The 87-year-old, who is in poor health and whose only other income is her pension, had put the money into the fund on the advice of her ANZ financial planner.
In its assessment of her investment needs, ANZ characterised the woman as a "defensive" or conservative investor. Last May Steven Giannoulis, ING's general manager of marketing, said the two funds were at the higher-risk end of the ING range of investments.
In March ING will ask investors to vote on a proposal to wind up the funds. They will be offered a sweetener in the form of a $100 million payout, to be made within weeks of the vote.
The $100 million is a loan from ING and the ANZ and would have to be paid back first before investors got any more of their money back from the wind-down of the assets.
ING chief executive Helen Troup said the initial cash payment was not an indication of the total amount investors would get back.
The vote, to be held in Auckland, will require a 10 per cent quorum and needs 75 per cent approval to pass.
A group of five financial advisers which is lobbying ING to pay investors out in full has described the $100 million loan as "disgraceful". It has estimated investors could get back as little as 15c in the dollar if they accept the proposal.
LOCKED UP
WHAT'S AT STAKE
$521m of 8000 investors' funds.
WHAT'S ON OFFER
Investors will vote on a $100 million sweetener in March.
