BT Funds Management’s former owners, the Principal Financial Group, has indemnified the new owner Westpac, to the tune of A$250 million for costs associated with BT’s non-compliance with securities law.
Under the law BT can market its Australian managed funds in New Zealand with their Australian prospectus as long as they meet a number of requirements. One of these requirements relates to how and when documents are filed with the Registrar of Companies.
BT says it may have been late filing some documents, which means that securities allotted during that period are invalid. The penalty for non-compliance is that investors are entitled to get their capital back, plus 10% interest per year.
"It is common to have some post-completion liabilities in the normal course of a sales transaction," NYSE listed Principal says in a statement.
"As part of the BT sales agreement, we agreed to indemnify Westpac, the purchaser, up to a maximum of A$250 million (approximately US$150 million), for costs associated with potential filing non-compliance. We are reviewing the applicability of the indemnity regarding this matter," senior vice president Mary O'Keefe says.
Principal regards the non-compliance issue as a technical one which may affect many in the industry.
"We continue to be hopeful for favorable legal/regulatory resolution," said O'Keefe.
"While the New Zealand Securities Act provides one remedy, if non-compliance is ultimately determined, it is not the only possible outcome - other avenues are being explored. A great deal of work is currently being done to identify liability for potential non-compliance, including any non-compliance periods, impacted investors and related legal/regulatory issues."
O’Keefe says Principal cannot estimate what liability, if any, will result from this situation.
She says that there is uncertainty about what constitutes non-compliance
Also she says that investors"were not damaged by any potential late filing of these technical documents, because investors received the information that is required to be provided directly to them."
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