Allied Finance directors warned - but no court

Sean Hughes will leave the Financial Markets Authority at the end of the year after three years in the job. Photo / Mark Mitchell

The former directors of the failed finance firm Allied Nationwide Finance have been issued a warning from New Zealand's market regulator but will not be facing any court action.

The Financial Markets Authority said today it had issued a warning letter to the directors of Allied, saying the FMA believed they had likely breached the Securities Act and that better disclosure should have been made so investors were aware of the risks involved.

Allied collapsed in 2010 owing $128 million to 7200 investors, who were covered by the Crown Retail Deposit Guarantee Scheme and so go their money back.

Nearly 750 investors who held bonds with the company, owed $15.5 million, were not covered by this scheme.

Allied directors for the period which the FMA investigated were John James Loughlin, Philip Charles Luscombe, Susannah Adair Staley, John Lewis Spencer, Paul MacFie, Gary Charles Bluett and Richard Nelson Spiers.

The FMA said today it would not be launching enforcement proceedings against Allied and three other failed finance companies, Equitable Mortgages, LDC Finance and Irongate Properties.

While the FMA's investigations had found some evidence of non-compliance with the Securities Act in these cases, it did not intend to take action.

FMA chief executive Sean Hughes said he acknowledged investors would be disappointed with the decision

"But when we weighed up all the factors, it would not have been appropriate to take proceedings, Hughes said.

"The directors of these failed finance companies have been reminded of their obligations to comply with all financial markets legislation, and we will continue to monitor their conduct within our general surveillance activities," he said.

"It is our expectation that the directors of these companies will disclose to the market the positions they held at the time of the collapse. The market is entitled to that transparency."

Approximately 97 per cent of amounts owing to secured investors in Equitable Mortgages was also paid under the Crown Retail Deposit Guarantee Scheme.

LDC failed in September 2007 owing $21 million to 1200 investors. Around 460 secured investors will receive payment in full of their principal plus a part distribution of interest.

Irongate owed $46.1 million to 1500 debenture holders when it collapsed in 2011. Investors have got 65.6 cents in the dollar back and receivers expect they will receive around 70 cents back in total.

The FMA still has five finance company investigations open and Hughes said announcements on these would be made by the end of this year.