KPMG has been appointed as the temporary manager of the funds by the Financial Markets Authority (FMA) — the first time the FMA has executed this power.
Fund Managers Otago (FMO) was removed from its role as manager of the three mortgage trusts — two of which are already being wound up — because it failed to improve its performance to a level that satisfied its licensed supervisor, Trustees Executors Limited.
The remaining fund called the NZ Mortgage Income Trust (No 2 Fund), with its 600 investors, will now also be wound up.
As of yesterday none of its investors were able to withdraw their money.
"This ensures all investors will be treated fairly and equally," Trustees Executors general manager of corporate trustee services Matthew Band said.
"KPMG Restructuring Services will be contacting investors to communicate its process for the winding up of this fund."
It is not known how much money is owed to investors.
After Trustees Exectutors removed FMO as funds manager, it was not able to find another licensed manager that wanted to fill the vacancy and so it had to request the FMA step in and appoint a new supervisor.
Two of the funds — the Capital Mortgage Income Trust and the NZ Mortgage Income Trust — were already in the process of being wound up.
Mr Band said his organisation had worked closely with Fund Managers Otago to try fix problems around governance, compliance, solvency and regulatory breaches.
"FMO has been unable to improve its performance to the standard that we expect from a licensed manager, and that which is required under the FMCA (Financial Markets Conduct Act)."
He said his organisation was obliged to monitor the funds in the best interests of all investors.
"We believe those interests are best served by the removal of FMO and requesting FMA to appoint KPMG Restructuring Services as the temporary manager."
The FMA’s director of supervision James Greig said the decision to remove FMO showed safeguards were there to be used if investors’ interests were threatened.
"Supervisors are the frontline regulators for managed investment schemes and their oversight is designed to ensure fund managers meet their obligations, and take appropriate action when managers do not meet those obligations," he said.
- Are you an investor with Fund Managers Otago? Our reporter Jacob McSweeny would like to hear from you. jacob.mcsweeny@odt.co.nz
