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A second contributory mortgage broker pleads guilty

News release
26 March 2014

A second contributory mortgage broker pleads guilty

First Mortgage Investments Limited, a contributory mortgage broking firm, has been convicted and fined $4,000 plus court costs for failing to deliver its annual report to the Registrar of Companies by 30 June 2013. First Mortgage pleaded guilty to the charge laid by the Financial Markets Authority (FMA).

The charge against First Mortgage was brought under the Securities Act (Contributory Mortgage) Regulations. The maximum fine is $5,000. The conviction was entered in the Auckland District Court on 20 March 2014.

Reporting and disclosure by contributory mortgage brokers, including the filing of annual reports, is an important part of the regulatory regime governing contributory mortgage brokers. It gives investors and potential investors information that enables them to understand the details of a broker’s financial position and is relevant to investment decisions.

FMA Head of Enforcement, Belinda Moffat, said: FMA seeks to raise standards of conduct in the market by encouraging compliance with financial markets’ legislation. However, where there is persistent non-compliance, FMA will take enforcement action.

“This conviction is a reminder to anyone taking investments from the public of the importance of fully and accurately disclosing financial information. It also reminds people of the consequences of failing to comply,” Ms Moffat said.



The Regulations are made under the Securities Act and regulate the offer to the public of interests in contributory mortgages and prescribe the requirements relating to the management of such interests.

Under a contributory mortgage, a number of investors contribute to a larger sum, which is then advanced to borrowers.

Regulation 12 of the Securities Act (Contributory Mortgage) Regulations requires contributory mortgage brokers to deliver an annual report to the Registrar of Companies. The annual report must comply with the Regulations and must include audited financial statements.

In the case of individuals, the annual report must be delivered not later than the 31st day of May each year. In the case of contributory mortgage brokers who are not individuals the annual report must be delivered not later than 3 months after the end of the contributory mortgage broker’s financial year.

The implementation of the Financial Markets Conduct Act 2013 does not affect the requirement for contributory mortgage brokers to deliver annual reports under the Regulations i.e. the filing obligations on contributory mortgage brokers remain unchanged.

Prudential Mortgage Limited was convicted of a similar offence on 5 March 2014.

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