Monday 9th September 2013 2 Comments
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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.”
Allied Nationwide Finance Limited (in receivership) owed $128 million to 7200 secured debenture holders when it went into receivership in August 2010. Under the Crown Retail Deposit Guarantee Scheme they were repaid the principal and interest on their investment. A further 749 perpetual bond holders who were owed approximately $15.5 million were not covered by the scheme. The directors for the period which was the subject of FMA’s investigation were: John James Loughlin, Philip Charles Luscombe, Susannah Adair Staley, John Lewis Spencer, Paul MacFie, Gary Charles Bluett and Richard Nelson Spiers.
Equitable Mortgages Limited (in receivership) owed $192.3 million to 6000 secured debenture holders when it went into receivership in November 2010. Under the Crown Retail Deposit Guarantee Scheme $170 million was repaid to 3700 investors. The directors for the period which was the subject of FMA’s investigation were: Christopher Albert Spencer, Allan John Wadams, Arthur William Young, David Parkes Forgie, Ross Alexander Aitken and David Scott Ferraby.
LDC Finance Limited (in receivership and liquidation) owed $21 million to 1200 investors when it went into receivership in September 2007. In July 2013, receivers Grant Thornton announced that 468 secured investors of LDC Finance are to receive repayment in full, plus a partial interest distribution. The directors for the period which was the subject of FMA’s investigation were: Kevin Elliott, Christopher John Hardiman, David Gordon Miller, John Charles Janetto. FMA also considered the conduct of auditors, trustees, and professional advisers, including accountants and lawyers involved in LDC in 2006-2007.
Irongate Property Limited (in receivership and liquidation) owed $46.1 million to 1500 secured debenture holders when it went into receivership in May 2011. The directors for the period which was the subject of FMA’s investigation were: Kevin John Podmore, Geoffrey Keith McWilliam, Philip Samuel Newland and Andrew David Walker.
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