Disgraced former finance company boss Sir Douglas Graham will retain his knighthood, the Prime Minister has announced.
Graham was among four Lombard Finance directors convicted of making false statements in a company prospectus.
Last week they lost a bid to have the Supreme Court hear an appeal against their convictions, however they were allowed to challenge their sentences.
Mr Key said Sir Graham might have given up his knighthood had the Government not told him he didn't have to.
Prime Minister John Key told media this afternoon he had made the "very difficult decision'' not to take away his knighthood after thinking about it at length.
He said Graham might have given up the knighthood himself had the Government not intervened.
"He might have returned it I think if we hadn't take the steps that we took but I deliberately didn't want to engage with him and make it a decision that he should make,'' Mr Key said.
"I think it's a decision the prime minister of the day should make.''
He said Graham had made no personal gain from his offending and he did not intend to mislead investors.
However, Mr Key said he could understand why investors would be "disappointed and potentially angry''.
"It was a difficult decision to make but I think I made the right one.''
"Now that Sir Douglas has exhausted his legal options to appeal his conviction, it is appropriate that I make a decision on the matter of his knighthood," John Key said today.
"I have given this matter a lot of thought in the period since it first went to court in 2011.
"I took into account the ongoing financial hardship that many Lombard investors suffered as a result of the company's collapse. Many people through no fault of their own have lost some, or all of their future financial security and that is an awful position to be placed in," Mr Key said.
In deciding that Graham should retain his knighthood, Mr Key said he was persuaded by three key factors.
"First, Sir Douglas received his knighthood for his leadership role in treaty settlements.
"Second, Sir Douglas was convicted of a strict liability offence, where dishonest or criminal intent is not required for conviction."
Mr Key noted the High Court found that Sir Douglas and the other defendants acted honestly at all times, genuinely believed the statements in the amended prospectus were true, and that careful attention had been given to the contents of the amended prospectus, including taking legal advice.
"Third, in both New Zealand, and in the United Kingdom, it has been very rare for honours to be cancelled. In those cases where it has occurred, it has often been because the actions that led to the cancellation were in the same area as that for which the original honour was awarded. This is not the case with Sir Douglas."
Mr Key praised Graham's "significant political legacy in the area of treaty settlements that subsequent Labour and National-led governments have worked to build on".
"New Zealand is a better country today because of the work Sir Douglas did as Treaty Negotiations Minister, and my judgment is that he deserves to retain his knighthood."