ComCom's payment to ING investors unfair advisers say

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The Commerce Commission has informed investors on whether they will get paid some of the $45 million settlement from ANZ over ING's Diversified Yield (DYF) and Regular Income Funds (RIF), but questions have arisen over the fairness of individual payments.

Tuesday, September 21st 2010, 6:40AM 2 Comments

by Jenha White

The Commission has directed ANZ to distribute payments to eligible investors using a method it describes as a targeted percentage capital return of about 96%. Payments are expected to be made by 12 November.

Auckland City Brokers director Richard Hurley says looking at his list of investors who have been paid out, similar types of investors have been treated unfairly.

He says the criteria for assessing eligible investors outlined in a letter from the Commission bears no resemblance to the payouts made.

‘"A five-year old with a bag of lollies could've shared them out more equitably than what we've seen here."

He knows four other financial advisers that have also noticed discrepancies in payouts to investors and they are recommending investors to write to ING by 30 October in complaint as recommended by the Commission.

He says discrepancies are readily apparent, "for example being able to claim tax losses was no bar to taking part in their distribution, yet many who could not claim have been ignored".

He says if this is the best the Commission could do, then the only fair way would be to repay according to number of units held.

The Commission says it considered using a pro rata approach which would have seen affected investors receive approximately seven cents for each unit they held in the Funds.

However, the Commission concluded that this method did not provide the fairest distribution of the settlement proceeds, as it could have provided a further payment to those who have already received their capital back, at the expense of other investors who may have only ended up receiving 70 or 80% of their capital back.

In a statement the Commission says in calculating payments, the experts creating the targeted percentage capital return model started with the investor's capital investment, and then took account of all transactions by the investor and applied a number of assumptions.

It says if an investor has not acted in accordance with the assumptions applied (e.g. has not accepted the ING Offer or has not taken advantage of the ANZ High Interest Account), this is not regarded as an error, and no further payment will be made. 

"The use of general assumptions in arriving at a payment method was necessary, given that there are approximately 15,000 investors potentially eligible to share in the pool of settlement monies, each with differing personal circumstances, and each having already received differing payments or compensation relating to their investment in the funds."

Some of the factors depended on in the amount to be paid include: the Fund invested in, the number of units bought and sold and the date of these transactions, the amount of any cash distributions received, the amount receivable from the ING Offer, whether the investor had received any other payments from the ANZ NSAC or Banking Ombudsman review process, and the assumed tax status of the investor.

The Commission says one of the most significant differences that is likely to arise when investors are making their own calculation and comparing them to their payment relates to tax.

It says if an investor is non de minimis it has been assumed that they have accounted for their investment as a Foreign Investment Fund in their tax returns.

"In almost all cases, the DYF and RIF generated taxable losses over the past two years, and investors have received, or were entitled to receive, tax rebates attributable to these. 

"If an investor has not accounted for the funds in their tax return in this way, they are probably still able to claim this tax loss."

The Commission says investors should consult a tax adviser, accountant, or the IRD. If an investor has been assumed to be non de minimis, it is not regarded as an error if they have not claimed this tax rebate.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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