by Rob Hosking
One fund manager stands to lose tens of millions of dollars because it was late telling the Companies Office of a slight change in title of a trust deed unless the law is changed, a Parliamentary select committee was told yesterday.Another fund manager could lose millions of dollars because it was late in filing a receipt notice.
These admissions were made to MPs yesterday hearing submissions on law changes which would “fix” what has become known a the "voided allotments" or Australian Registered Managed Investment Schemes (ARMIS) exemption notice row.
Offshore funds can be promoted in New Zealand without issuing a local prospectus so long as certain documents are filed with the Companies Office. If documents are not filed on time, new securities issued become void and the fund managers not only have to return the money but pay investors a 10% annual penalty.
Under the proposed changes fund managers could seek relief from the penalty by taking their case to the High Court.
Currently more than a dozen managers are believed to have breached the law. The total amount of money involved is estimated at $700 million, however this may be a conservative estimate.
"It is very difficult to understand the net value of the money involved," Russell McVeagh partner Hamish McIntosh, who is representing Edinburgh Funds Management, Macquarie Equities, and other firms, told MPs.
"I can say though that I personally act for firms which are affected to the tune of between $20-30 million."
McIntosh told MPs that as well as the sheer amount of money involved, there is an issue of fairness.
New Zealand-based fund managers making the same mistake would not suffer the same penalty.
"I am being asked to explain to overseas managers why all the allotments are voided because one or two papers were not deposited with the Companies Office; why it has never been discovered before, and why it appears to impose a disproportionate penalty on overseas issuers compared to local issuers. It is total chaos and I cannot give them an explanation," he said.
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Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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