ANZ to pay out $45m over ING

Photo / Dean Purcell

The Commerce Commission has reached a record $45 million settlement with ANZ New Zealand over the promotion of ING's diversified yield and regular income funds.

ANZ will pay the settlement on top of $500 million already available to investors from its compensation offer last year, according to documents obtained by BusinessWire.

That eclipses the $27.5 million settlement reached with Midavia Rail and David Richwhite over alleged insider trading of Tranz Rail shares.

The regulator found the promotion of the degree of investment risk in the ING funds was "misleading" and that there was sufficient evidence to pursue proceedings against both ING and ANZ for breaching the Fair Trading Act. The regulator decided against this course of action, saying the settlement was the best outcome for investors in the funds.

The Securities Commission will also end its investigation into the funds, the documents say.

"The commission believes that the best interests of New Zealand consumers, and the affected investors in particular, are served by this settlement, which will see payments to eligible investors totalling $45 million," chairman Mark Berry said in a draft statement sighted by BusinessWire. "Any court proceedings were likely to have involved significant delay, cost and risk, with no certainty of achieving an outcome that would benefit the affected investors."

The regulator put off announcing its decision on the frozen funds in April, citing a clash with its work priorities, then deferred it for a further couple of months due to ongoing discussions with ANZ. The funds collected some $700 million from about 14,000 investors before being frozen in March 2008.

Commission spokeswomen Felicity Connell said the regulator can't comment on the case. A spokesperson for ANZ wasn't immediately available to comment.

John Body, ANZ managing director of private banking and wealth, apologised for the performance of the funds, according to a separate draft statement, and said that although they didn't agree with all of the commission's opinions, it is "in the interests of investors to avoid a lengthy court process."

ANZ and the regulator will work to determine a payment process to eligible investors, with a target for payment in November, the documents say.

About 98.5 per cent of investors in the frozen funds accepted an offer from ING that saw them receive 60 cents in the dollar for investments in the diversified yield fund, and 62 cents in the case of the regular income fund, though they had to forgo any right to legal action.