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FMA looking into Pyne Gould related party transactions

Wednesday 2nd May 2012 1 Comment

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The Financial Markets Authority is looking at some of Pyne Gould Corp's related party transactions, which along with complaints about the wealth manager's governance, prompted KPMG to quit as the company's auditor.

The market watchdog has "made inquiries over related party transactions involving PGC over the past two weeks," Pyne Gould said in a statement. The wealth manager is cooperating with the FMA, but is unable to make any further comment, it said.

"I can confirm that FMA has been making inquiries over the past two weeks into issues regarding PGC and related entities, has been actively engaging with the company in relation to these issues, and is aware of the issues between KPMG and PGC," FMA chief executive Sean Hughes said in an emailed statement. "At this stage it is not appropriate for FMA to comment further, particularly as our inquiries are on-going."

That comes a day after KPMG resigned over “unresolved differences as to whether certain transactions should be disclosed as related party transactions, and concerns over the adequacy of governance and management of financial reporting.”

Pyne Gould rejected the auditor's claims, saying it would have afforded KPMG the opportunity to air its concerns in the 2012 annual report. The Christchurch-based company appointed Deloitte on April 2 to oversee its central accounting functions.

KPMG's resignation comes a week after managing director John Duncan unexpectedly stepped down after joining Pyne Gould in 2009 from a 15-year career with Macquarie Group.

Businessman George Kerr replaced Duncan with immediate effect, having taken control of Pyne Gould via his Australasian Equity Partners No 1 LP (AEP) venture with US hedge fund Baker Street Capital.

AEP secured 76 percent of the company in a 37-cents-a-share takeover bid that closed in March.

Kerr became involved in Pyne Gould in 2009, taking a cornerstone stake after the company faced large writedowns on the value of its Marac finance unit's property loan book, which has since been divested.

Since Kerr's involvement, Pyne Gould has taken stakes in the Torchlight funds, which are Kerr-managed vehicles that specialise in squeezing value out of distressed assets, and its board approved increasing the capital available to Torchlight to “seek modest investments beyond the Torchlight fund.”

That includes a $7.5 million stake in an overseas equities fund, the management contract of ASX-listed IEF Real Estate Entertainment Group, and essentially seized control of the ASX-listed RCL Group, which invests in residential properties across Australia and in Queenstown, by buying up its debt facilities.

Pyne Gould's shares fell 5.9 percent to 32 cents yesterday, and are 14 percent below AEP's takeover offer.

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Comments from our readers

On 2 May 2012 at 9:45 am robert said:
Who is going to suffer here. The long suffering shareholders I bet. Who has been making the money out of these related party transactions? Thank you George Kerr.
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