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Macquarie Group under fire over van Eyk fund

June 29, 2016 | Team Kalkine
Macquarie Group under fire over van Eyk fund

An agreed statement of facts with Macquarie was lodged by the Australian Securities and Investments Commission over investments in 2012 made by the van Eyk Blueprint International Shares Fund (VBI) fund. In a statement,Macquarie agreed that it was the responsible entity and did not do enough in that role in the assessment of the risks in the fund, which collapsed in 2014, after making an investment of $ 30 million in a fund based in the Cayman Islands. van Eyk Research firm established in 1989, which collapsed in 2014, was the investment manager for the VBI fund and Macquarie was the responsible entity. The law requires the responsible entity to be ultimately responsible for the operations of a fund in the best interest of investors.
 
The VBI fund made an investment of $ 30 million in Artefact, a Cayman Islands fund, which was illiquid and resulted in the fund being terminated by Macquarie in 2014 along with the suspension of redemptions from various funds. In the statement of facts with ASIC, Macquarie acknowledged that it failed to make an adequate risk assessment of the investment and did not make adequate or timely enquiries about the monitoring of Artefact Investments by the fund. ASIC has said that the court will hear joint submissions on the appropriate penalties which will be determined by the court. The maximum penalty Macquarie faces is $ 1 million because there were five contraventions of the law, each of which could attract a fine of up to $ 200,000. ASIC has in the past, argued that the penalties in this particular area of corporate law are not heavy enough and should be subject to review. This action comes after several steps against firms that did not meet their obligations as responsible entities in the wake of ASIC determining to bring home the importance of their duties.
 
Macquarie said that 89% of the money in the fund had been returned to investors by April of the previous year and the entire amount of $ 30 million has now been returned. In consultation with ASIC, the firm has agreed in the settlement that it did not exercise sufficient care and diligence in relation to the investment in Artefact. Despite the Macquarie action to recover funds for investors, ASIC is driving home the point that responsible entities must take adequate steps in the assessment and monitoring of investments. The van Eyk fund was one of the Blueprint series of funds managed by van Eyk, for which Macquarie was the responsible entity and the van Eyk fund and three other funds with exposure to the fund together managed more than $450m. van Eyk was one-time a much respected research house and fund manager based in Sydney, worth around $ 30 million in 2012. Four of the funds of the company were initially suspended in August 2014 by Macquarie because investments were supposedly illiquid.
 
Macquarie has already witnessed such situations before wherein conditions were imposed by the regulator on Macquarie’s financial services licence post mishandling of client money over 10 years, and lately two Macquarie employees were banned from providing financial services.

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