December 17, 2019 / 03:26AM / By NZ FMA / Header
Image Credit: Finance Magnates
The FMA has issued two sets of civil proceedings in the
Auckland High Court against CBL Corporation Limited (In liquidation) (CBLC),
the six directors and the chief financial officer alleging multiple breaches of
the Financial Markets Conduct Act 2013 ("FMC Act"). The FMA is seeking
declarations of contravention 1 and civil pecuniary penalties in both proceedings.
CBL was listed on the NZX main
board in 2015. It had a market capitalisation of $747 million, and a share
price of $3.17, when it went into suspension from trading in February 2018. The
company was put into voluntary administration in February 2018, and then placed
in liquidation in May 2019.
The FMA had established these
regulatory objectives in pursuing this case:
- sending an important
denunciation and deterrence message where misconduct is identified in an
area of strategic importance to New Zealand's financial markets;
- Holding to account those
considered most culpable for any identified misconduct, e.g. directors or
- Clarifying the law and
provide important legal precedent for future actions.
Based on these objectives the
following proceedings have been filed.
The first proceeding concerns
alleged breaches of the FMC Act in relation to disclosures by CBLC as part of
its Initial Public Offering in September 2015,
- failure to disclose related party transactions; and
- false and/or misleading statements in respect of solvency
ratios and the use of the IPO proceeds.
The defendants to this
proceeding are CBLC, directors Peter Harris and Alistair Hutchison, and CFO
The second proceeding concerns
alleged breaches of the FMC Act, namely:
- failure to comply with continuous disclosure obligations in
- the need to strengthen CBLI's reserves;
- aged SFS premium receivables following the acquisition of
- directions issued to, and conditions imposed on, CBL
Insurance Europe dac (CBLIE) by the Central Bank of Ireland (Central
- misleading and deceptive conduct and/or unsubstantiated
representations in trade in respect of CBLC's market announcement on 24
The defendants to this
proceeding are CBLC, and its directors Sir John Wells, Peter Harris, Anthony
Hannon, Norman Donaldson, Ian Marsh, Alistair Hutchison and the CFO, Carden
Nick Kynoch, FMA General Counsel, said, "Our key statutory objective is to promote and facilitate the development of
fair, efficient and transparent financial markets. There will be corporate
failures in a well-functioning market, however the size and circumstances of
CBL's collapse threaten our overarching objective. Because of this we conducted
a significant and complex investigation into CBL's failure.
"We have identified a number of areas of
potential misconduct by CBL and its directors and considered a range of
potential enforcement actions against the backdrop of our regulatory
objectives. We are also mindful of bringing an appropriately targeted and manageable
case. The proceedings filed today address these objectives.
"We also acknowledge the two
litigation-funded class actions filed by investors against CBL, which are
primarily aimed at securing compensation for investors. The FMA will engage
with investors and the courts to manage the various proceedings now in
"Investors exercising their own legal
rights and pursuing privately funded litigation plays an important part in a
well-functioning market, which the FMA strongly supports. However private civil
litigation may not always address areas of broader public interest that are of
concern to the FMA."
The FMA's two sets of civil
proceedings have been drafted separately for ease of understanding, as each one
relates to different underlying facts and different time periods. The FMA
proposes that the two proceedings be heard together.
where declarations of contravention and penalties are sought will, if granted,
provide the ability for individual claimants to seek compensation in reliance
on the declarations of contraventions (which will have been established by the
The maximum amount of a
pecuniary penalty for a contravention, or involvement in a
contravention, of a civil liability provision is likely to be $1 million in the
case of a contravention, or involvement in a contravention, by an individual or
$5 million in any other case.
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