FMA confirms $18m Hanover settlement

See also: Investors wanted quick settlement: FMA and Eric Watson only one of Hanover directors and promoters not to contribute to $18M FMA settlement

The Financial Markets Authority has accepted $18 million from the former directors and promoters of Hanover Finance to settle its $35m civil claim filed in 2012.

In addition to the payment, former Hanover directors Mark Hotchin, Greg Muir, Sir Tipene O’Regan and Bruce Gordon have agreed not to act as directors of a bank or non-bank deposit-taker until 1 May 2018, without the prior written approval of the FMA.

Eric Watson and Dennis Broit, as directors of Hanover’s parent company, have told the FMA that they do not intend, now or in the future, to act as directors of a bank or non-bank deposit-taker.

The settlement amount will be distributed to eligible investors who invested in the Hanover finance companies in the period from 7 December 2007 to 23 July 2008. (See settlement document below)

FMA chief executive Rob Everett said the settlement terms gave a better outcome than going to court.

“This payment is likely to be greater than any recovery that might have been available at the end of a trial,” he said.

“The undertakings and representations provided by the defendants meet the FMA’s regulatory objectives and hold the defendants to account. This ensures they will not be directors of bank or non-bank deposit takers for a period of time. Undertakings are used by the FMA to provide an element of protection for investors.”

The FMA had claimed Hanover and United issued investment documents containing significantly false statements in 2007 and 2008.

However, there was no reference in the FMA’s statement to an admission of liability for those allegedly false statements by the defendants.

Accountant Bruce Sheppard, a member of the establishment board that set up the FMA, said he believed admission of liability was a core issue in the case.

If the FMA had settled without it “it is contrary to their enforcement policy, contrary to their statement of intent and they would be deservedly roasted by the media and I will happily add to that chorus because it ain’t the organisation I thought I helped found,” he said.

In helping set up the FMA, “my objective was to have a regulator with a lion’s heart and belly full of food to chase prey, not to have a pussy cat sitting under a tree yawning while the game runs past.”

RAW DATA: Thes settlement document (PDF here)