The Financial Markets Authority (FMA) says the sale of an Auckland house to the wife of its ex-CEO David Hisco should have been disclosed as a related party transaction by ANZ New Zealand in its 2017 financial statements.
The FMA says it's continuing to engage with ANZ and will require the bank to issue a corrective statement on its 2017 financial statements. Additionally the FMA says it's talking to the NZ Institute of Chartered Accountants about it considering whether to assess auditor KPMG's procedures "in determining the disclosures in the audited 2017 financial statements."
For its part ANZ says no specific related party disclosure was made in its audited 2017 financial statements, as the $6.9 million property sale by an ANZ controlled company to "a related party of ANZ New Zealand's Chief Executive Officer at that time" was not considered by ANZ or KPMG to be material to an understanding of ANZ’s financial performance and financial position.
"ANZ disagrees with the FMA’s finding as it considers the transaction not to be material information on the basis that this disclosure could not influence the economic decisions of the users of financial statements," the bank says.
"ANZ New Zealand and its Board takes financial reporting obligations very seriously and acknowledge that the FMA has reached a different conclusion to that reached by ANZ New Zealand and its external auditor as to the disclosure of the transaction."
"ANZ New Zealand welcomes this opportunity to gain further clarity on the FMA's expectations regarding the disclosure of related party transactions, and as a result of this matter will consider the impact on its internal financial reporting processes and continue to enhance those processes, where necessary," ANZ says.
KPMG declined to comment.
On June 17 ANZ announced Hisco was leaving the bank, allegedly by mutual agreement, after his expensing to the bank of chauffeur driven cars for personal use and wine storage dating back nine years had come to light.
Subsequently a series of stories by journalist Kate MacNamara for Stuff detailed Hisco's broader expenses over his tenure, details of the house purchase by Hisco's wife from ANZ, with the house apparently having a maintenance bill of more than $100,000 a year, topped off by suggestions ANZ staff tried to blow the whistle on Hisco's expenses as long ago as 2014.
Since Hisco's departure Antonia Watson, ANZ's managing director for retail and business banking, has stepped in as acting CEO. At a press conference announcing Hisco's departure ANZ chairman John Key endorsed Watson as Hisco's permanent successor. However Watson was a director of Arawata Assets, the ANZ controlled company that sold the house to Hisco's wife at the time of sale, which may dent her prospects.
FMA decides against going to court
In comments attributed to its CEO Rob Everett, the FMA told interest.co.nz the regulator had decided not to take ANZ to court.
“We consider that ANZ has breached its financial reporting obligations, contained within the Financial Markets Conduct Act. ANZ disputes this so this matter would need to be tested in the court. We did require ANZ to make a corrective statement, which they have now done. Given the nature of the alleged breach is already in the public domain, we don’t consider pursuing court action to be a proportionate response or use of public money. Accordingly, we will not be pursuing any court action," Everett said.
Here's the FMA's full statement.
The FMA said today it has completed its inquiry into disclosure by ANZ of the sale of the property at 269 St Heliers Bay Road by Arawata Assets Limited to Deborah Veronica Walsh (the wife of former CEO, David Hisco) and has determined that ANZ New Zealand Group should have disclosed this as a related party transaction in its 2017 financial statements.
The FMA determination is primarily based on the nature of the transaction which, in our view, makes this disclosure material for the financial reporting purposes.
ANZ disagrees with the FMA’s finding as it considers the transaction not to be material information on the basis that this disclosure could not influence the economic decisions of the users of financial statements.
In terms of the valuations, the FMA has not assessed the appropriateness of the sale price as this is the matter for other agencies to consider.
The FMA has informed the Reserve Bank of New Zealand of its determination, reflecting the RBNZ’s role in banking supervision, and as part of the joint focus on conduct and culture. The Australian Securities and Investments Commission (ASIC), as the primary regulator of ANZ’s parent company, has also been informed.
The FMA has engaged with NZICA as the front line regulator for auditors, for it to consider whether to assess the auditor’s procedures in determining the disclosures in the audited 2017 financial statements.
The FMA is continuing to engage with ANZ and will require it to issue a corrective statement relating to the 2017 financial statements. The FMA expects ANZ to review its internal financial reporting in light of this issue.
And here's ANZ's statement.
In 2017, the ANZ New Zealand group entered into an agreement to dispose of a residential property to a related party of ANZ New Zealand's Chief Executive Officer at that time. The sale price of $6.9m was determined following a process to ascertain the value of the property with reference to external, independent valuations.
The application of the accounting standards on related party disclosures requires judgements to be made on what information is quantitatively or qualitatively material to be included in the financial statements, including consideration of whether disclosure of a transaction could influence economic decisions that relevant users make on the basis of the financial statements.
No specific related party disclosure was made in ANZ New Zealand's audited 2017 financial statements, as the sale of the property was not considered by ANZ New Zealand and its external auditor to be material to an understanding of ANZ New Zealand’s financial performance and financial position.
Based on its enquiry into this specific matter, the FMA has informed ANZ New Zealand that it takes the view that the related party transaction was material for financial reporting purposes, and therefore it should have been disclosed in ANZ New Zealand’s financial statements for the year ended 30 September 2017. The FMA and ANZ have agreed that ANZ will issue this statement to help clarify the position.
ANZ disagrees with the FMA’s finding as it considers the transaction not to be material information on the basis that this disclosure could not influence the economic decisions of the users of financial statements.
ANZ New Zealand and its Board takes financial reporting obligations very seriously and acknowledge that the FMA has reached a different conclusion to that reached by ANZ New Zealand and its external auditor as to the disclosure of the transaction.
ANZ New Zealand welcomes this opportunity to gain further clarity on the FMA's expectations regarding the disclosure of related party transactions, and as a result of this matter will consider the impact on its internal financial reporting processes and continue to enhance those processes, where necessary.
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