Wells resigns from CBL board as FMA takes early view it may have broken disclosure, reporting rules
By Paul McBeth
July 13 (BusinessDesk) - John Wells resigned as chairman of CBL and two other directors joined him in departing the board after the Financial Markets Authority said it was concerned the failed insurer had breached disclosure and reporting rules and directors hadn't met their fiduciary obligations.
The market watchdog is working with the Reserve Bank and Serious Fraud Office in investigating the insurer after prudential supervisors in New Zealand and Ireland sought interim liquidation orders in their respective jurisdiction. The FMA has been investigating CBL's disclosure amid fears the public market rules were breached, and today said a preliminary assessment raised concerns the insurer potentially FInancial Markets Conduct Act and Companies Act rules around initial public offering disclosure, continuous disclosure as a listed entity, financial reporting, and directors' duties. It also said it's considering Deloitte's role as auditor of the firm.
The regulator said interested parties have asked it to use step-in powers and exercise potential shareholder rights under the Companies Act. The FMA said it will only use that power if it's in the public interest.
"At this time, given the preliminary stage of the investigation, the FMA has not yet determined whether the use of this power would be appropriate," it said in a statement. "That determination will not be made until the investigation has progressed further."
CBL appointed voluntary administrators in March after the Reserve Bank sought an interim liquidation of the New Zealand supervised arm and the Central Bank of Ireland made similar moves against CBL's European division.
A statement from CBL's board today acknowledged the contribution of Wells, Paul Donaldson and Ian Marsh. "Details of a refreshed board will be announced when the restructure is tabled with shareholders," it said.
Defending the board's actions today, Wells said directors had been conscious of the need for new capital but its plans had been disrupted by the Reserve Bank's application. Still, as chairman, he said: "I particularly regret we have been unable to communicate directly with shareholders and other parties as I would have wished, given the nature of the administration and interim liquidation processes. We now feel we can simply do no more for shareholders and with little power or authority, our resignation is the appropriate option in these circumstances, and provides clarity and certainty over our position."
The Auckland-based insurer had its stock suspended from the NZX on Feb. 8 amid concerns from NZX Regulation about the information it had given the market, following engagement between it, CBL, the Financial Markets Authority, the Reserve Bank, and a number of overseas regulators with prudential oversight of CBL’s international insurance business. On Feb. 20, CBL Insurance told the Reserve Bank it was continuing to operate despite being below the minimum regulatory solvency.
The FMA said it didn't think it was appropriate to use powers for the sole purpose of seeking compensation for shareholders, with other avenues available to investors.