The Financial Markets Authority finally files civil proceedings against directors and promoters of the failed Hanover Finance, Hanover Capital and United Finance - but of surprisingly limited scope.
Some critics have called the Financial Markets Authority's civil action against former Hanover principals surprisingly limited in scope.
The proceedings focus on $35 million invested between December 2007 and July 2008 - a modest part of the $500 million lost by around 16,000 investors.
But FMA boss Sean Hughes hinted more action could be on the way.
"Our case in relation to the 2007-2008 period is strongest, and that's where we're focusing right now," Mr Hughes told TVNZ's Q&A programme.
He did not rule out future claims.
Yesterday, the authority revealed it had filed civil proceedings against directors and promoters of Hanover Finance, Hanover Capital and United Finance.
Proceedings under the Securities Act have been filed against Mark Hotchin, Eric Watson, Greg Muir, Sir Tipene O’Regan, Bruce Gordon and Dennis Broit.
They relate to statements made in the December 2007 prospectuses, subsequent advertising and the March 2008 prospectus extension certificate.
The FMA is seeking declarations, pecuniary penalty orders and compensation for investors who made investments during the period from December 7, 2007, to July 22, 2008. During this period new investments and reinvestments totalled $35 million.
The proceedings were filed on Friday, and made public by Mr Hughes yesterday on Q&A.
"We've brought that action because we make allegations that certain statements that were made in various fundraising documents and advertisements over the 2007-2008 period were misleading and were untrue," he told the programme.
The High Court had yet to set a timetable for the proceedings, he said.
Mr Hotchin told media he was surprised to learn of the civil action through a TV programme.
A parallel investigation into Hanover by a second government agency, the Serious Fraud Office, is continuing.
The authority originally announced its intention to take civil action back on December 15.
2008 collapse
Hanover and United Finance froze $554 million of investor funds, from around 16,000 investors, in August 2008. The assets and loans were later transferred to Allied Farmers with investors swapping their stricken fixed interest debentures with shares in the small Hawera-based firm.
Those shares have plummeted in value with Allied Farmers writing down the value of the assets acquired from $396 million to $93 million.
The Hanover companies were co-owned by Mark Hotchin and Eric Watson. Mr Watson was never a director of the companies.
In December 2010, the Securities Commission (now remodelled as the FMA) froze some assets held in trusts associated with Mr Hotchin in advance of any proceedings.
According to Companies Office records, directors who signed the Hanover Finance December 2007 prospectus included then chairman Greg Muir, Sir Tipene O'Regan, Bruce Gordon and Mr Hotchin.
The promoters were Hanover Financial Services and Hanover Group.
FMA chief executive Sean Hughes said on December 15 last year that it has been a significant investigation focusing on a period in which investor deposits totalled approximately $35 million.
“We have carefully considered a substantial volume of relevant material and we’ve had the benefit of independent advice,” he said.
“We have now reached a point in the investigation where we are confident that we have good grounds to commence civil proceedings. We believe this is the most effective regulatory response and we’re confident it offers the greatest opportunity for success.
“If successful, FMA’s action may assist other parties in bringing related claims. We are also examining avenues under section 34 to seek compensation from other parties on behalf of aggrieved investors,” Mr Hughes said.
“Given the public interest in the investigation we want to keep the market as informed as we can.”
