New Zealand's market watchdog has taken unprecedented action against a failed finance company trustee, accusing it of breaching obligations owed to both investors and Treasury, which bailed the firm out.
The Financial Markets Authority said this morning it had filed civil proceedings against Prince and Partners Trustee Company, the trustee of failed finance company Viaduct Capital, which collapsed in 2009 owing investors $7.8 million.
The regulator says it has "serious concerns" about the conduct of Prince and this is the first time the FMA has taken action against a trustee company.
"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 FMA director of enforcement Belinda Moffat.
The type of action launched allows 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 FMA said this morning.
"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 regulator said.
The FMA said the court could award compensation to "investors who suffered loss as a result of Prince's failure to fulfil its obligations as Trustee."
Viaduct was part of the Crown's retail deposit guarantee scheme, which was established to try to bolster confidence amidst the global financial crisis.
Around 95 per cent of what was owed to Viaduct investors was paid out by Treasury, according to the latest receivers' report.
The rest of investors and Treasury were expected to get back 20c to 27c in the dollar back but the receivers have since advised this level of return is unlikely.
The FMA has taken a separate prosecution against men associated with Viaduct, including Paul Bublitz, Bruce McKay, Richard Timothy Blackwood.
These men have been charged with theft by a person in a special relationship and making false statements in a prospectus.
They are also accused of making false statements to Viaduct's trustee.
Nick Wevers was also facing prosecution in this case but died shortly after charges were filed and so these were subsequently withdrawn.