FMA urged to move on KiwiSaver losses
The Financial Markets Authority is being urged to use its power to ‘‘step in’’ and protect the interests of the shareholders of failed insurer CBL.
Hundreds of thousands of KiwiSavers are among the shareholders who have taken a hit from the NZX-listed company’s collapse.
CBL shares were worth a combined $750 million in early February, but are now being valued by some fund managers at zero since news broke of trouble in its French insurance operation.
Also in February, CBL Insurance was put into interim liquidation by the High Court at Auckland after directors sent $55m overseas, defying a Reserve Bank order.
The failure of CBL left many Kiwi building insurance policyholders with worthless policies, but it also left many KiwiSavers out of pocket, though few realise.
Fund managers which invested in CBL included the ASB and AMP KiwiSaver schemes, representing hundreds of thousands of ordinary savers.
In an update on its investigation into CBL on Friday, the Financial Markets Authority (FMA) said it had not yet decided to use its power to step into the shoes of investors. Such action could ultimately include it heading to court seeking damages on their behalf from directors.
The FMA had ‘‘concerns about potential breaches’’ of the law by CBL directors, and was ‘‘also considering the performance of the auditor, Deloitte’’.
It had been urged to step in and exercise the rights of shareholders, who lacked the money and power to defend their own interests.
‘‘At this time, given the preliminary stage of the investigation, the FMA has not yet determined whether the use of this power would be appropriate. That determination will not be made until the investigation has progressed further,’’ the authority said.
But revelations that large numbers of KiwiSavers have lost money in CBL’s failure prompted John Hawkins, chairman of the New Zealand Shareholders’ Association, to urge the FMA to think again.
‘‘While the association was working on behalf of individual retail shareholders, it is also very concerned about the position KiwiSaver investors find themselves in,’’
Hawkins said.
KiwiSavers were ‘‘once removed’’ by being exposed to the CBL collapse as a result of their KiwiSaver funds owning shares in CBL.
‘‘To date, we have not seen activity on the part of institutions working on their behalf,’’ Hawkins said.
‘‘We understand there are a large number of KiwiSaver accounts that are invested in CBL, and we feel this broadens the base of investors that FMA should be seeking to protect.’’
KiwiSaver schemes operate by investing in funds with hundreds, sometimes thousands of shares, but investors may not realise what companies they have a stake in.
AMP claims more than 230,000 KiwiSaver members. All have lost money as a result of the collapse of CBL Insurance through AMP’s KiwiSaver scheme funds.
ASB also had KiwiSavers in its growth and balanced funds invested in the failed insurer.
When considering using its powers, the FMA has to look to the public interest. ‘‘The FMA does not consider it would be appropriate to exercise . . . powers for the sole purpose of seeking compensation for shareholders,’’ it said.
The Reserve Bank and the Serious Fraud Office were continuing their investigations, the FMA said.
Directors, including managing director Peter Harris, were ‘‘working to develop and present a plan as an alternative to the liquidation process’’, a statement to the NZX by CBL said on Friday. The statement announced the resignation of Sir John Wells, Paul Donaldson and Ian Marsh from CBL Corporation, and its subsidiary CBL Insurance.