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FMA update on finance company investigations

Page last updated: 14 Sep 2011

Media Release
14 September 2011

The Financial Markets Authority (FMA) announced today that investigations into 16 collapsed finance companies involving an estimated $3.45 billion of losses to investors were continuing, with decisions on the most advanced cases likely before the end of 2011.

Chief Executive Sean Hughes said the 16 ongoing investigations were:

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

 "FMA's decisions are consistent with our recently published Enforcement Policy, and are the result of careful review and analysis since we began operating just over four months ago in May," said Mr Hughes. 

"Amongst the cases remaining under FMA's scrutiny are some involving large numbers of investors at risk of significant or potential loss; in which there is information suggesting unlawful behaviour; and where there is a need to send a clear regulatory signal to the markets."

FMA's 16 ongoing investigations are at different stages of completion:

  • Five cases are close to the point at which recommendations will be made on bringing civil and/or criminal proceedings;
  • In a further six cases, a significant body of information has already been obtained which FMA staff and external advisers will continue to review and analyse with the aim of completing the investigations as soon as possible;
  • In the remaining five cases, where FMA does not yet have enough information to decide whether to continue or to close the investigation, it has appointed external investigators and forensic accountants from three leading insolvency practices to assist. Announcements will be made in the next two months as to whether these investigations will continue or be closed.

FMA has also identified six cases it will not pursue at this stage because further investigation would not be in the public interest because no law breaches have been identified. The six cases are:

All Purpose Finance (trading as St Kilda Finance) Geneva Finance
Direct Property Investments (No.6) Mascot Finance
Finance & Leasing Strata Finance

"In those six cases in which we have decided not to pursue our investigations, we have carefully assessed whether we have seen information suggesting unlawful behaviour; whether such information is sufficient to justify charges or proceedings; and whether it would be in the public interest to prosecute," said Mr Hughes.

In those six cases FMA has not found any breaches or had any brought to its attention. Consistent with FMA's Enforcement Policy it has concluded there is no public interest in continuing its investigation, without sufficient cause.

In the case of Rockforte Finance, FMA closed its investigation because it referred the matter to Serious Fraud Office (SFO). Should the SFO not proceed to prosecution, FMA may decide to reopen its investigation. Rockforte Finance investors' capital is subject to a Crown guarantee, as are investments in Strata Finance and Mascot Finance. This means the Crown will compensate investors for their losses in part or in whole.

FMA announced on 20 June that it had closed its investigation into Aorangi Securities (including Hubbard Management Funds) and referred the matter to the Serious Fraud Office.