A Wellington investment company raided by the Financial Markets Authority was suffering from a "vacuum of leadership", a court has been told.
Ross Asset Management, its sole director, David Robert Gilmour Ross, and nine related parties were placed in receivership yesterday after a hearing in the High Court at Wellington.
Hugh Rennie, QC, representing the authority, told the court that Mr Ross had more than 900 clients, but it was unclear how much their investments were worth. Receivers will spend the coming days attempting to establish the true value of the investments.
"The balances of the accounts of those investors, not to be confused with the funds invested by those investors, totalled slightly over $439 million," Mr Rennie said. It was possible there could be a shortfall, but the regulator was acting with incomplete information so conclusions should not be drawn.
The authority was seeking to appoint receivers to a company because of a "vacuum in management and a dysfunction which needs to be remedied".
An affidavit from a former staff member revealed serious concerns dating back to at least August, Mr Rennie said.
"They included failure in decisions, failure to implement requests from investors for payment, inadequacies of records, and so on."
Up to 27 clients had contacted the FMA complaining that they had been unable to withdraw money as requested, although it appeared some had been able to redeem their investments recently.
Mr Ross, a respected fund manager whose clients were attracted by returns often in excess of 30 per cent, was not at yesterday's hearing.
His lawyers have confirmed he is in hospital. Mystery over his condition deepened yesterday when Victoria Heine, of law firm Chapman Tripp, revealed that the firm had not yet been able to take instructions from him.
Ms Heine said she was representing only some of the Ross entities which were the subject of FMA orders, because the firm had no idea what some of the others were.
John Fisk, of PricewaterhouseCoopers, said it appeared that no one other than Mr Ross was involved in the management of the funds, despite the large number of clients and investments involved.
"That creates a lot of uncertainty in terms of what are the assets that are owned, and who is entitled to those assets," Mr Fisk said.
"You've got an individual who is looking after over 800 individual investor accounts and $300 million to $400 million in funds under management, so it's an awful lot for one individual to do."
An update to go to investors was likely to seek more information from them than could be prepared within 48 hours, Mr Fisk said.
He is also required to prepare a report for the court next week.