Former CBL Corporation CFO Carden Mulholland ordered to pay $1.2m for continuous disclosure breaches

Former NZX-listed insurance company CBL Corporation collapsed in 2018.

Former CBL Corporation (CBLC) chief financial officer Carden Mulholland has been ordered to pay more than $1.2 million for continuous disclosure breaches.

Mulholland was ordered by the High Court to pay a pecuniary penalty of $641,250 and costs of $606,216.53.

In February, the High Court found Mulholland had the required level of knowledge and participation in the conduct to make him personally liable, as an accessory, to three of CBLC’s continuous disclosure contraventions.

The ruling was the first time New Zealand courts have considered the liability of a CFO acting as an accessory to a company’s contravention under the Financial Markets Conduct Act 2013 (FMCA).

It was another victory for the Financial Markets Authority (FMA) in its long-running battle with directors and staff of the former NZX-listed insurer.

CBLC was listed on the NZX’s main board in 2015 before its collapse in 2018. It went into liquidation in May 2019.

Justice Ian Gault said Mulholland’s “significant involvement” in the contraventions had a “serious and far-reaching” impact on the market.

“As the FMA submitted, the lack of disclosure by CBLC meant investors were denied timely access to material information and continued to trade, uninformed, for an extended period of more than five months.

“The penalty imposed against Mulholland as a senior officer with specific responsibilities in relation to disclosure needs to reflect the importance of listed companies making prompt and accurate disclosures to the market, as well as his specific involvement in the contraventions.”

Margot Gatland, the FMA’s head of enforcement, said the penalty set an important precedent for holding a CFO accountable for an entity’s continuous disclosure breaches.

“The court’s ruling and penalty demonstrate that such behaviour is unacceptable and will not be tolerated. The FMA will continue to take action when we see this type of misconduct damaging the trust and confidence in New Zealand’s financial markets and businesses.”

The FMA has already reached in-court settlements with CBLC, its former managing director Peter Harris and four former independent non-executive directors, resulting in each admitting seven contraventions and pecuniary penalty orders totalling $11.28m. 

In August last year, Harris was ordered by the High Court to pay a $1.4m penalty after admitting continuous disclosure and misleading conduct breaches.

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The FMA took Mulholland to trial last year, which ran for six weeks.

Mulholland’s continuous disclosure breaches related to:

• The existence and impact on regulatory solvency of approximately $35m of aged receivables (insurance premiums owed to CBL Insurance but not paid to it). This issue was known to CBLC by August 24, 2017, but was not disclosed to the market until February 5, 2018.
• The need for CBLI to strengthen its reserves by approximately $100m. This was known to CBLC by January 25, 2018, but was not disclosed to the market until February 5, 2018.
• A direction issued to CBL Insurance Europe by its prudential regulator, the Central Bank of Ireland, requiring CBLIE to hold additional cash reserves of €31.5m. This was known to CBLC by January 30, 2018, at the latest, but was not disclosed to the market until February 7, 2018.