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Bank sale ‘won’t stop legal action’

March 19, 2012

Bank sale ‘won’t stop legal action’ 

Last updated 05:00 20/03/2012

The Commerce Commission says the sale of a controversial investment bank will be no barrier to legal action if it decides to pursue a claim over huge losses in one of the bank’s complex financial products.

Credit Sails notes, sold to New Zealand investors for $91.5 million in 2006, are worthless after a series of debt defaults ripped through their complex fabric in 2008.

The product was created by a subsidiary of French bank Credit Agricole named Calyon, since renamed Credit Agricole Corporate & Investment Bank, and marketed by local broker Forsyth Barr.

A report in the Financial Times at the weekend said US hedge fund Blue Mountain had taken over the remnants of Credit Agricole CIB and would manage the wind-down of its legacy assets.

But a Commerce Commission spokesman said a transaction of that nature would make no difference if it chose to take legal action.

The commission has been investigating the offer and sale of Credit Sails in relation to potential civil action under the Fair Trading Act. Securities Act charges have also been considered, although the Financial Markets Authority has deferred enforcement to the Commerce Commission.

In a statement issued yesterday[monday], the commission said: “The Commission’s inquiries in this matter are nearing an end. We are now communicating our views to the parties involved. No further update will be given until that process is completed.”

Fund manager Greg Marshall of Logic Funds Management, who has been campaigning for Credit Sails investors, said he believed the commission would take action.

In a newsletter issued to investors this week, Marshall said Logic had learned the Commerce Commission was in discussions with the various parties concerned.

“Although we are not aware what the discussions cover nor whom they are with, we are hopeful that it may involve a form of settlement because in our quest to seek an independent legal opinion we discovered that most major NZ law firms had conflicted interests.”

– © Fairfax NZ News

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