FMA announcement on finance company cases

9 September 2013

FMA announcement on finance company cases

The Financial Markets Authority (FMA) today announced that it has completed investigations into four of its remaining finance company cases.

FMA inherited 25 finance company investigations from the Securities Commission when it came into force on 1 May 2011. To date, 32 directors have been convicted.

Having now completed its investigations into potential breaches of financial markets legislation, including the Securities Act and the Companies Act, FMA has announced that it will not be taking enforcement proceedings in the following cases:

Allied Nationwide Finance Limited (in receivership)
Equitable Mortgages Limited (in receivership)
LDC Finance Limited (in receivership and liquidation)
Irongate Property Limited (in receivership and liquidation)

FMA’s investigations focused on possible breaches of the Securities Act and identified some evidence of non-compliance. However, taking into account FMA’s Enforcement Policy, the prospects of success and potential defences, existing returns to investors, and public interest considerations, including the efficient use of public resources, FMA does not intend to take enforcement action.

FMA has issued a warning letter to the directors of Allied Nationwide Finance saying it is FMA’s view that they likely breached the Securities Act and that better disclosure should have been made to ensure investors were aware of the risks associated with their investment.

“I acknowledge that investors will be disappointed with today’s decisions, but when we weighed up all the factors, it would not have been appropriate to take proceedings,” said FMA CEO Sean Hughes.

“The directors of these failed finance companies have been reminded of their obligations to comply with all financial markets legislation, and we will continue to monitor their conduct within our general surveillance activities,” said Mr Hughes.

“It is our expectation that the directors of these companies will disclose to the market the positions they held at the time of the collapse. The market is entitled to that transparency.”

Under the Crown Retail Deposit Guarantee Scheme, secured debenture investors in Allied Nationwide Finance were repaid the principal and interest on their investments. Approximately 97% of amounts owing to secured investors in Equitable Mortgages have also been paid under the Crown Retail Deposit Guarantee Scheme.

Irongate receivers anticipate that the total distribution to secured bondholders will be approximately 70 cents in the dollar of principle outstanding at the date of receivership.

Secured investors in LDC are expected to get their money back, plus some interest, following last month’s announcement of a settlement with Finance & Investments Partnership.

“FMA is committed to completing its finance company investigations so that we can focus on today’s issues,” said Sean Hughes.

“We will be making announcements on the remaining five investigations by the end of 2013.”

Ends

© Scoop Media