RAM investor action against ANZ important test of bank duties - FMA
By Gavin Evans
July 12 (BusinessDesk) - Legal action against ANZ Bank by former investors in the failed Ross Asset Management business is an important step in resolving their claims, the Financial Markets Authority says.
The action filed by the investor group today is based on investigative work done by the FMA into how the ANZ managed the bank accounts of Ross Asset Management prior to its collapse in late 2012.
In April, the Supreme Court backed the FMA’s bid to allow it to share information gained from ANZ during its investigation with investors of RAM and the liquidators of the firm.
FMA chief executive Rob Everett said his organisation had spent three years responding to ANZ’s legal challenge to enable it to provide relevant information to the investors.
“This matter raises important questions around bankers’ duties and we are pleased they will now be tested in the court,” he said.
ANZ executives weren’t immediately available for comment.
Ross Asset Management collapsed in late 2012 in the country’s largest Ponzi scheme. More than 800 investors believed more than $450 million was being managed on their behalf, but actual losses were closer to $100 million.
David Ross was sentenced to 10 years’ jail for fraud. Only about $10 million has ever been recovered.
A spokesman for the investor group, John Strahl, says more than 200 investors have signed up to join the action filed in the Wellington High Court.
It claims ANZ breached its duties while a banker to Ross Asset Management, particularly for actions known as “knowing receipt” and “dishonest assistance”.
“Since receiving the FMA’s material we have sought our own independent analysis and legal advice. This confirms that we have a very good claim against ANZ and we are now proceeding with legal action.”
Strahl says the group believes ANZ – one of the country’s largest fund managers - either knew that Ross Asset Management was being run as a Ponzi scheme or should have known.
By law RAM was meant to be holding investor funds in a client account to be invested on behalf of the client who deposited the funds, he said.
ANZ did not require this and instead allowed funds being deposited to be used for non-investment purposes, including paying RAM expenses, reducing RAM’s unauthorised overdraft with ANZ and also to repay other investors.
The action is being supported by LPF Group, the largest New Zealand-based litigation funder which specialises in funding representative actions and large commercial claims.
They will fund the costs of the claims on behalf of the investors and will take a fee if successful. If the claims are unsuccessful LPF is required to pay all costs of the claim.