Accounting problems
- Mistakes, delays, audit qualifications and controversy over accounts can be warning signs. Accounting rules can be complex and genuine errors or differences in views do occur, but repeated issues may indicate deep-seated problems.
Published statements
- A key on-going requirement for listed companies is to disclose certain information to the market in a timely manner through an information service - usually via a stock exchange.
- It is a good idea to keep an eye out for such announcements as it will help keep you informed as to what is happening within the company.
- If you belong to KiwiSaver a good place to look for information is in the annual statements and reports.
Management problems
- Director and senior management in-fighting, resignations, breaches of the law or unethical conduct can be warning signs. Changes in management may be necessary, but it could distract the management's attention from running the business.
Over-promising and under-delivering
- While even the best managers can make mistakes, on-going disappointing results, lack of communication and falling service standards may point to something being seriously wrong.
Deal with investment challenges
- Market and economic conditions can change rapidly, but a knee-jerk reaction can make things worse. The key is to keep your end goal in mind. The investment loss may be due to various factors, for example; a fall in the overall market, problems with one investment in your portfolio, poor advice or breaches of the law. Here's what to do if:
What if your investment value falls?
What if your investment company gets into financial trouble?
Sometimes companies fail for different reasons. You should contact them immediately if:
- They stop paying your interest payment
- They stop paying the distribution you expect to receive
- You see something in the media about your investment company going into administration, liquidation or receivership.
The most recent prospectus or the investment statement will have your investment company's contact details. Alternatively, if you know who the receiver is, you can contact them directly.
Whether you will get any money back will depend on what type of investment you have and the financial status of the company. For example, if you own shares in the company, any money that is recoverable will first go to the company's creditors and then to shareholders.
It's also a good idea to get legal advice about your rights and whether you are entitled to any compensation early on. The reasons for the company defaulting may include misconduct or a breach of the law, and you might be able to be compensated. For more information see our information on how to get your money back.