The report trustee firms – with Perpetual and Covenant singled out in particular – took a serious pasting from the Companies Office.
The report called the trustees timid, understaffed and hamstrung by “weak” trust deeds that favoured finance company commercial imperatives over good governance.
The Companies Office also suggested the ownership structure of some trustee companies could weaken their ability to make tough “institutional strength” decisions.
And finally, the report says trustee company mistakes tend to be overlooked by receivers “who are appointed by the trustees, and who look to trustees for further assignments”.
“We understand receivers are uncertain as to their standing to consider such issues. There is therefore, in practical terms, no real avenue for investors for examination of the performance of trustees or to pursue redress for negligence in the performance of their duties.”
Commerce Minister Simon Power said yesterday that the role of trustees would be addressed as part of a significant review into the Securities Act.
He says that one option being considered “is fast-tracking the development of a trustee supervisory model.”
"This model was suggested by the Review of Financial Products and Providers and would see the Securities Commission playing a stronger role in the supervision of trustees.
The role of corporate trustees is also likely to be considered by the Capital Market Development Taskforce.
"I also welcome a select committee inquiry into the failure of the finance companies, however, the terms of reference will need to be carefully considered.
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