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Credit Sails Securities Commission probe confirmed

April 20, 2011

Credit Sails probe confirmed




Last updated 12:26 12/04/2011


The Securities Commission has confirmed it is investigating Credit Sails, a complex financial product whose value collapsed from $91.5 million in 2006 to zero amid the global financial crisis.

The probe adds to an existing investigation by the Commerce Commission into whether the product’s marketing breached the Fair Trading Act.

A spokesman for the Securities Commission refused to give details of the investigation, save that ”the Commission is looking into disclosure made by the company.”

In its latest annual report, the issuer of Credit Sail notes said it had asked for legal advice on its potential legal liability arising from the offer.

”Currently both the Commerce Commission and the Securities Commission are investigating the circumstances of the offer and sale of Credit Sails notes,” it said. ”These investigations are at a very early stage and it is not possible to predict the outcome.”

There was a risk of criminal or civil proceedings against the company under the Fair Trading Act or the Securities Act, it said, as well as possible civil claims by noteholders.

Credit Sails notes were sold to the public in May 2006, offering interest of 8.5 per cent and a capital guarantee rated ‘AA’ by Standard & Poor’s.

The issuer of Credit Sails notes was Credit Sail Ltd, a company registered in the Cayman Islands. Their  creator and promoter was Calyon Hong Kong, an investment banking subsidiary of giant French bank Credit Agricole.

The offer was underwritten and lead managed by sharebroker Forsyth Barr.

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