Investors in frozen ING funds are in line for a 95% return of their original investment, following the Commerce Commission’ landmark $45 million settlement with the fund manager and the ANZ National Bank.
The regulator has outlined its payment method to distribute the $45 million fund – the largest financial settlement for the competition watchdog to date.
The commission said about 80% of the 1500 investors who had money in two frozen ING funds should receive a payment from the $45 million fund.
The remaining investors are likely to recover, or may have already recovered, more than 95% of their principal through other remedial steps.
These include accepting the ING offer, receiving compensation from the ANZ or through the Banking Ombudsman’s Office and through claiming adjustments on tax losses in relation to their investments in the funds.
The Commerce Commission said the payment approach met its intention to return as much of investors initial capital as possible, in the most fair way.
Commerce Commission enforcement branch manager Graham Gill said in reaching the decision around payment, it had made certain assumptions, rather than precisely calculating the position for each of the 15000 individual investors.
“Taking this approach we can ensure that the payments approximate each investor’s likely circumstances, are equitable and are quickly executed,” said Mr Gill.
An alternative approach, considered by the Commission, was to make a pro rata or ‘cents per unit’ payment. This would have seen affected investors receive approximately 7 cents for each unit they held in the funds.
Payments are expected to be made by mid to late November.
ANZ will pay the $45 million settlement on top of $500 million already available to 14,000 investors from its compensation offer last year.
Commerce Commission investigations centered around whether promotion, by ANZ and ING, of two frozen ING funds breached the Fair Trading Act by misrepresenting the degree of risk of the funds.
ING’s Diversified Yield and Regular Income funds were advertised as low or moderate risk, but contained investments in complex collateralised debt obligations (CDOs).
ING collected about $700 million from 14,000 investors before freezing the funds in March 2008 as the financial crisis began to bite.
At their peak they were worth $850 million.
The Commerce Commission said it had found the bank’s promotion of the degree of investment risk was “misleading” and that there was sufficient evidence to take proceedings against ANZ and ING for breaching the Fair Trading Act.
However, the commission decided against this course of action, saying the settlement was the best outcome for investors in the funds.
ANZ National faced a maximum fine of $200,000 under the Fair Trading Act.
Wed, 21 Jul 2010