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FMA narrows focus to 16 finance companies

September 14, 2011

FMA narrows focus to 16 finance companies

Locating key witnesses and relevant documents are hampering finance company investigations, the Financial Markets Authority said today.

In an update to media, the regulator said it continued to pursue 16 finance company investigations involving an estimated $3.45 billion of losses to investors.

Chief executive Sean Hughes said decisions on the most advanced cases would likely be made before the end of the year, although he declined to name those companies.It could take up to two years to resolve all 16 cases, but five were close to the point of making decisions on bringing civil and/or criminal proceedings.

Among the 16 ongoing investigations are high profile big names Hanover Finance, South Canterbury Finance and Strategic Finance.

Others include Allied Nationwide Finance and Equitable Mortgages, whose investors, along with South Canterbury’s, were repaid by the Crown under the retail deposit guarantee scheme.

Mr Hughes said the FMA was keen to resolve the cases, which had created a “stench or a cloud” over this country’s regulations.FMA chairman Simon Allen said the FMA’s main objective was to restore investor confidence.

The FMA identified six cases it had decided not to pursue because it had not found any breaches or had any brought to its attention.This meant there was no public interest in continuing the investigation without sufficient cause.

Those companies no longer being pursued include St Kilda Finance, Direct Property Investments No. 6, Finance & Leasing, Geneva Finance, Mascot Finance and Strata Finance.

The FMA closed one investigation into Rockforte Finance after referring it to the Serious Fraud Office.

It had also referred Allan Hubbard’s Aorangi Securities and Hubbard Management Funds to the SFO, which had now withdrawn charges against Mr Hubbard following his death in a car accident two week’s ago.
Asked what main obstacles lay in front of the investigations, Mr Hughes said some stemmed from having inherited such a large number of investigations from the Securities Commission.

Many of the cases were at different stages and the previous administrator did not necessarily have the resources available that the FMA now has, he said

“In other cases we’ve not been able to speak to key witnesses or the relevant documents have not been available,” Mr Hughes said.

The over riding theme was poor corporate governance and related party transactions, he said.

In deciding whether it was in the public interest to take cases the FMA must consider several factors including the size of investor losses, the seriousness of the alleged misconduct, the age of the conduct (whether the case is stale or whether the evidence is still available) and the reliability of witnesses.

The 16 ongoing investigations include:

* Allied Nationwide Finance
* Boston Finance
* Equitable Mortgages
* Hanover Capital
* Hanover Finance
* Kiwi Finance
* LDC Finance
* Mutual Finance
* OPI Pacific Finance (formerly MFS Pacific)
* Propertyfinance Securities
* South Canterbury Finance
* St Laurence
* Strategic Finance (including Strategic Nominees)
* Structured Finance
* Viaduct Capital
* Vision Securities

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