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FMA files civil proceedings against trustee

Page last updated: 20 Aug 2014

Media Release
MR No. 2014 – 027
20 August 2014

The Financial Markets Authority (FMA) has filed civil proceedings against Prince and Partners Trustee Company Limited (Prince), using the powers of section 34 of the Financial Markets Authority Act. Prince was the trustee for finance company Viaduct Capital Limited (Viaduct).

Viaduct collapsed in 2009. FMA alleges that Prince breached the obligations it owed to Viaduct investors and to the Treasury (the Crown) under the Retail Deposit Crown Guarantee.

Section 34 of the Financial Markets Authority Act enables the FMA to stand in the shoes of another, and exercise that person’s right to take action against an individual or company who is or has been in the financial markets industry.

Exercising the right of action of Viaduct investors and the Treasury (who holds the rights of investors paid out under the Crown Guarantee), FMA alleges that Prince failed to fulfil its obligations to protect the interests of investors in Viaduct. The claim further alleges that this conduct resulted in loss to individual investors and to the Treasury under the Crown Guarantee, to which Viaduct was a party.

The FMA has serious concerns about the conduct of Prince as trustee in the case of Viaduct. The FMA has determined that it is appropriate for the Court to consider the conduct in this case, and where appropriate to award compensation to investors who suffered loss as a result of Prince’s failure to fulfil its obligations as Trustee. This is the first claim filed by FMA against a trustee.

“Trustees play a critical role in protecting the rights of investors and it is vital the public have confidence that a trustee’s obligations will be discharged,” said Belinda Moffat, FMA Director of Enforcement.

FMA has brought separate criminal charges against individuals associated with Viaduct which are currently still before the Court.

Andrew Park
09 967 1215
021 220 6770


Section 34 Financial Markets Authority Act 2011

Section 34 of the Financial Markets Authority Act 2011 (FMA Act) is a significant power conferred on FMA on its establishment. It allows FMA to 'stand in the shoes' of another and to exercise that person's right to take action against a financial markets participant.

The potential scope of claims that may be pursued under s34 is very broad and includes claims in contract, tort or arising from breach of statutory obligations (such as a claim by the company for breach of directors’ duties under ss133-137 of the Companies Act 1993). Similarly, the categories of “person” whose actions may be pursued is also very broad. A s34 proceeding must result from an inquiry or investigation carried out by FMA.

FMA can only take a case under s34 if it is satisfied that it is in the public interest to do so, having regard to the matters set out in s34(5) of the FMA Act. This does not permit FMA to take a case merely because parties cannot or will not bear the cost of private litigation. The threshold for FMA taking a case is set high.

Noting that every case will be considered on its own facts, FMA considers that the principle policy considerations supporting the factors in s34(5) will include (not in any order of priority or weighting) whether action by FMA under s34 would:

(a) Promote the fairness, efficiency and transparency of New Zealand’s financial markets; and
(b) Clearly advance FMA’s regulatory objectives; and
(c) Use FMA’s resources effectively.

Prince and Partners

In September 2012, FMA declined the application by Prince and Partners for a licence under the Securities Trustees and Statutory Supervisors Act 2011, which came into effect on 1 October 2011.

FMA News release
19 September 2012
FMA announces licensing of Securities Trustees and Statutory Supervisors
Click here to read full release.

Charges in relation to Viaduct Capital:

FMA News release
21 March 2014
FMA files criminal charges following investigation into Viaduct and Mutual
Click here to read full release.


Case: Prince and Partners - Settlement Agreement and Judgment