French bank Credit Agricole and Dunedin-based broker Forsyth Barr have created a NZ$60 million (A$48 million) fund to compensate investors who lost money invested in the Credit Sails fund.Investors lost almost all the NZ$91.5 million they invested in Credit Sails, a leveraged corporate debt derivatives fund promoted to them in 2006 as "capital guaranteed."The creation of the fund to compensate almost 3,000 retail investors is part of a confidential settlement with the Commerce Commission whereby Credit Agricole and Forsyth Barr admit no liability.Credit Agricole's Calyon investment division created the Credit Sails (Saleable Index Linked Securities) bonds in 2006. They were marketed to small investors as "capital guaranteed" bonds with an 8.5 per cent interest rate and an AA credit rating from Standard and Poor's.They were based on Collaterised Debt Obligations (CDOs) on top of a collection of corporate debt, including debt issued by Lehman Brothers, Washington Mutual, Glitnir Bank, Kaupthing Bank and Landsbanki. The value of the Credit Sails product was wiped out almost completely by early 2009, after the collapse of the banks. Investors still holding the Credit Sails securities would have received about NZ$20 back for every NZ$1000 invested when they matured on 22 December this year.Instead, Credit Agricole and Forsyth Barr said the NZ$60 million compensation fund would mean investors would be compensated for 85 per cent of their NZ$70 million in losses. The Cayman Islands-registered Credit Sails paid its promised interest in 2006, 2007 and early 2008. Commerce Commission chairman Mark Berry said there were sufficient grounds to start legal action against Credit Agricole and Forsyth Barr because they marketed Credit Sails in a way likely to have breached the Fair Trading Act. The Commission said the Credit Sails bonds were highly complex and unsuitable for the "average" investor, and Credit Agricole and Forsyth Barr should have known that.Credit Agricole and Forsyth Barr disagree with the Commission's view and have admitted no liability."While the Commission could have issued proceedings, those proceedings would likely have been lengthy, costly and with no absolute certainty of a successful outcome," said Berry, adding the settlement fund was an "excellent outcome."The Financial Markets Authority also agreed not to take any further action.Credit Agricole and Forsyth Barr did not disclose how much each had contributed to the fund. Forsyth Barr's managing director, Neil Paviour-Smith, said the firm's clients placed their trust in Forsyth Barr and it took its responsibilities seriously."Our role and focus on driving for a settlement, and, ultimately, our financial contribution to the settlement, demonstrates we are worthy of that confidence," Paviour-Smith said.Forsyth Barr also helped promote the NZ$200 million (A$160 million) float of carpet-maker Feltex in 2004 to retail investors. It collapsed in 2006, costing its 6,000-plus investors more than NZ$150 million.