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FMA targeting Christmas prosecutions on finance company "stench"

Wednesday 14th September 2011 2 Comments

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The Financial Markets Authority is aiming to decide before Christmas whether to lay prosecutions or drop five of its 16 remaining investigations into the “stench” caused by finance company collapses by Christmas, with progress on another six to follow close behind.

In its first update on the finance company investigations since it took over four months ago from the Securities Commission, the new financial markets watchdog says it is taking greater interest in cases involving evidence of wilful unlawful behaviour than negligence in its quest for justice on behalf of depositors who saw $3.45 billion of savings destroyed in finance company collapses.

Among failed lenders still in the FMA’s sights are Hanover Finance, Strategic Finance and South Canterbury Finance, although Serious Fraud Office charges against SCF principal Allan Hubbard relating Aorangi Securities were withdrawn last week after his death in a car accident on Sept. 2.

FMA chief executive Sean Hughes told media in Auckland he was more confident about making a decision on three of the five investigations targeted for pre-Christmas resolution.  He declined to name names, which could jeopardise their investigations, and assured media they would be updated as and when appropriate.

“These cases have created a stench or a cloud over New Zealand’s corporate regulations which we think is unmerited,” Hughes said. “Realistically, I see the job of getting those matters to a point where we can make a decision on either laying charges or commencing proceedings is going to take the next couple of years.”

Companies still in the FMA’s sights are Allied Nationwide Finance, Boston Finance, Equitable Mortgages, Hanover Capital, Hanover Finance, Kiwi Finance, LDC Finance, Mutual Finance, OPI Pacific, Propertyfinance Securities, South Canterbury Finance, St Laurence, Strategic Finance, Structured Finance, Viaduct Capital and Vision Securities.

The FMA decided not to pursue cases in investigations where it didn’t find any information suggesting unlawful behaviour, and firms no longer under investigation are St Kilda Finance, Direct Property Investments No. 6, Finance & Leasing, Geneva Finance, Mascot Finance and Strata Finance.

The update on the finance company investigations comes 10 months after the FMA’s predecessor, the Securities Commission, said it had initiated 50 investigations, prosecutions or referrals to other authorities in the wake of the sector collapse through the latter half of the decade.

Chairman Simon Allen said a failure of corporate governance was to blame for many of the failures, and the FMA’s new regulatory procedures aim to address that hole.

Hughes said the FMA’s priority was chasing cases where unlawful behaviour was wilful rather negligent.

The watchdog will also be open to cutting deals as part of the process, and Hughes said not all of its investigations will lead to charges.

“One shouldn’t assume all of those matters will necessarily run to trial and may well be the defendants will approach us to secure an early compromise, and we would welcome those approaches,” he said.

On top of the five finance company investigations targeted for completion by Christmas, are six where a significant amount of information and the FMA aims to complete those as soon as possible, and another five where a decision to proceed will be needed.


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Comments from our readers

On 14 September 2011 at 3:24 pm HJ said:
Does this mean that the FMA will take no action against Dominion Finance directors?
On 14 September 2011 at 5:16 pm peter said:
Great to see ldc is still up for investigation. There is much to be revealed there
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