Ross Asset suffered 'vacuum of management'
Ross Asset Management will be managed at least temporarily by PwC as brokers from First NZ Capital attempt to work out the affairs of a company which suffered a ‘‘vacuum of management’’ a court has heard.
Today the High Court in Wellington heard an application from the Financial Markets Authority (FMA) to appoint a manager and a broker to the Wellington-based asset manager, having won an order freezing its assets and those of a number of related companies on Friday.
Hugh Rennie, QC, told the court that the FMA believed that the company, managed by experienced investment adviser David Ross, had more than 900 clients. Collectively it appeared the balances shown on the clients’ accounts totalled more than $430 million, although Rennie made it clear that there may be some shortfall.
The company's tax returns to the Inland Revenue appeared to be two years in arrears.
Rennie said Ross Asset Management appeared to have suffered from "a vacuum of management and a dysfunction which needs to be remedied".
He added later that there was no conclusion as to what the state of Ross' companies were. "Things may be good, they may be bad".
The appointment of John Fisk of PwC was effectively a company receivership, although it was possible the matter may ultimately be resolved by the company's management.
Justice Jill Mallon granted the order, which gives Fisk five days to come up with a preliminary report as to the state of the businesses. Brokers from First NZ Capital, who were not individually named by the court, will be called in to establish the state of the investments.
Last night Ross’ lawyer, Chapman Tripp partner Pip England, confirmed Ross was currently in hospital. While no detail was given in court, Victoria Heine, who was representing some of Ross’ entities, said she had not been able to take any instruction from him.
Investors will be updated by the FMA within 48 hours.
A number of people who said there were investors with Ross were in court today, although all declined to comment when approached.
Rennie said the information in front of the court from the FMA was incomplete and it was important not to draw conclusions about what had occurred at Ross Asset Management.
Since Friday, when the FMA raided Ross Asset Management, its offices in Morrison Kent House on The Terrace have remained locked. All of the staff have resigned, Rennie said.
This morning’s hearing was held in Chambers, which means the public are usually unable to attend and media are unable to report. Heine had opposed access being granted to the public and the media, however Rennie said people in the court were under the control of Justice Mallon, who could suppress matters before her. In the end nothing of the hearing was suppressed although the court file on the case was sealed.
On Friday, the FMA said its application to freeze the assets of Ross Asset Management and its other companies was made after investors began contacting it with concerns.
Today Rennie said up to 27 had been in contact complaining that they had been unable to withdraw their money, with concerns apparently dating back to August. During that period it appeared that some investors had been unable to withdraw money.
There were now concerns from the FMA as to the failure of Ross Asset Management to make decisions, failure to make payments and concerns about the adequacy of record keeping.
Records showed so far suggested the company was involved in investment transactions in New Zealand, Australia, the United State, Britain and ‘‘other jurisdictions’’ Rennie said. ‘‘It is fairly described as a complex matter’’.
It was not possible to know whether there had been any incomplete trades, calls to be made or whether certain steps should be taken with the assets to preserve their value, Rennie said.
It was ‘‘not at this stage’’ proposed that Ross Asset management be liquidated.
In a statement, PwC’s Fisk said as well as being appointed to run Ross Asset Management and nine related companies, the receivers had also been appointed to Ross personally. The statement did not elaborate on its direct role with Ross.
“Our first priority will be to establish the financial position of the Ross Group. In this regard, we will be writing to all known investors within the next 48 hours,’’ Fisk said.
‘‘In addition, the receivers and managers will be reporting back to the Court in five days on initial progress and proposed further actions.’’
PwC would take control of the assets of all of the Ross entities and would, with First NZ Capital ‘‘be responsible for preserving client investments’’.