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FMA issues formal warning to St Laurence directors

FMA issues formal warning to St Laurence directors - investigation closed

The Financial Markets Authority (FMA) has closed its investigation into St Laurence Limited (in liquidation) and has formally warned eight directors of St Laurence Limited in respect of potential breaches of the Securities Act.

Based on the evidence it has seen, FMA considers that St Laurence’s September 2007 prospectus failed to properly disclose information about loan quality and liquidity for the period March – June 2008. The directors have been advised of these findings.

FMA has reached the view that in distributing the prospectus with inadequate disclosure, there was likely to be a breach of the Securities Act 1978, for which the directors may be liable.

The directors who have been warned are: Kevin Podmore, James Sherwin, Geoffrey McWilliam, Keith Sutton, Barry Graham, Aeneas Edward O’Sullivan, Andrew Walker, and Sandra Lee (alternate for Kevin Podmore and Aeneas Edward O’Sullivan).
Taking into account FMA’s enforcement policy and public interest considerations, it has determined that issuing a warning, rather than bringing court proceedings, is the appropriate and proportionate response in this case.

FMA concluded that minimal additional benefit in terms of punishment, deterrence or redress for investors would have been achieved by taking any proceedings in Court.

FMA’s decision to issue a formal warning took into account a number of factors, including:
The short, four-month period in which FMA believes the disclosure breaches occurred, during which reinvestment in St Laurence was low

The absence of evidence of personal gain or dishonesty involved in the alleged misconduct

Defences that might have been argued by the directors in court.

During the short period in 2008 under consideration there were no new or rolled-over investments in St Laurence capital notes. Investments in St Laurence secured debentures during this period totalled approximately $4.5 million. That indicates total aggregate losses to investors of $3.3 million, taking into account recoveries.

FMA’s Head of Enforcement, Belinda Moffat said “In balancing the cost of taking this case to court against the low level of recovery that might be achieved and also considering the possibility of successful defences being argued, FMA has elected to issue formal warnings to the directors.

“A further relevant factor in deciding to issue a warning rather than take the case to court was the absence of evidence of personal gain or dishonest conduct on the part of the directors.”

Ms Moffat said in FMA’s view, the St Laurence prospectus, issued in September 2007, did not contain adequate information about the company’s declining liquidity and loan quality, which FMA believes became material from March 2008.

FMA considers that the financial health of St Laurence disclosed to investors, from this period, did not reflect the true position of the company, and the directors should have recognised this and ensured the appropriate disclosures were made.

St Laurence withdrew the September 2007 prospectus on 30 June 2008.

St Laurence went into receivership in April 2010. Distributions by the receiver to date have totalled 16.7 cents in the dollar.

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