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Dominion and North South directors accused of misleading investors

Wednesday 7th July 2010

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The Securities Commission has accused the directors of failed financier Dominion Finance and its sister company North South Finance of misleading investors, and has laid criminal charges and civil proceedings against them.  

The criminal charges against directors Vance Arkinstall, Richard Bettle, Terence Butler, Ann Butler, Paul Forsyth and Robert Barry Whale carry a maximum penalty of five years imprisonment or fines of up to $300,000, while the civil penalties are up to $500,000 against each director.  

The commission alleges the directors made false statements in the 2007 Dominion and North South prospectuses and extension certificates, and that a quarterly newsletter in 2008 contained similar untrue statements about the financial position of the companies. It’s continuing its investigations into the companies, and parent Dominion Finance Holdings, and is considering further proceedings.  

“The commission alleges that Dominion Finance Group’s offer document and advertisements misled investors by misrepresenting the investment risks, especially in relation to related party transactions, lending standards, loan quality and impairment, liquidity and the company’s overall financial position,” said chairman Jane Diplock in a statement.

“The commission also alleges that North South Finance’s offer documents and advertisements misled investors in relation to related party transactions, liquidity and the company’s overall financial position.” 

The regulator’s enforcement action against failed finance companies has come under pressure since the sector collapsed owing billions of dollars to thousands of investors, and in May, it told investors that it wouldn’t be pursuing refunds from financiers on their behalf.  

In recent months, the commission laid charges against the directors of Capital + Merchant and Lombard Finance & Investment, and recommended Commerce Minister Simon Power place Timaru millionaire Allan Hubbard under statutory management along with some of his business interests.  

It also began proceedings against Nuplex Industries over its disclosures last year. Arkinstall is the chief executive of Investment Savings and Insurance Association, the lobby group for fund managers and insurers.  

Dominion Finance was sent to the receivers in 2008, owing $176.9 million to some 5,900 investors, after it failed to negotiate a moratorium. North South was spared after its trustee agreed to an orderly supervised wind down.  

Dominion’s receiver, Rod Pardington of Deloitte, told investors in an update in March they can expect repayments of between 10 cents to 25 cents in the dollar.

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