Former Cabinet minister Sir Douglas Graham says he will be defending civil and criminal proceedings being brought against him by the Securities Commission.

The commission is accusing Sir Douglas and three fellow directors of failed company Lombard Investments of making false statements in their December 2007 prospectus.

It says they did not adequately disclose the impact of the credit crisis on the company which went into liquidation in April 2008 owing around $127 million to over 4,000 creditors.

Sir Douglas said the prospectus was prepared by management, commented on by the auditors and solicitors and then accepted by the Companies Office. The document was sent to the Trustee. None of them advised the board of any concerns with the final wording.

"The directors do not accept the allegations of the commission and will be defending all the proceedings," Sir Douglas said in a statement.

"Finally I must record my dismay that it has taken 2-1/2 years to make the allegations and very disappointed the commission has never raised with me any concerns it had over the prospectus prior to filing proceedings."

Sir Douglas said that in the three months between what he described as a prospectus filed in December 2007 and the company going into receivership, the company received about $8.5m in deposits, but how many investors had relied on the prospectus was unknown.

Sir Douglas, who was former chairman of Lombard Finance, was also minister in charge of treaty negotiations and attorney-general in the National government of the 1990s.

Among the other directors charged was Bill Jeffries, justice and transport minister in the Labour government of the late 80s.

The two other directors issued with civil proceedings under the Securities Act were Laurie Bryant and chief executive Michael Reeves.

The commission alleges the directors made false statements in a registered prospectus dated September 7 2007, a memorandum of amendments dated December 24, 2007, and investment statements dated December 28, 2007.

The documents stated the company's financial position had not materially and adversely changed since the company's last balance date and that the prospectus was not misleading by failing to properly refer to adverse circumstances.

But the commission alleges that was false and the directors' statements misled investors.

It also alleges that a DVD advertisement distributed during 2007 and 2008 contained similar untrue statements about the financial position of the company.

"The commission alleges that Lombard Finance & Investments' offer documents and advertisements misled investors by misrepresenting the investment risks, especially in relation to liquidity, the quality of the loan book, adherence to credit policies and the company's overall financial position," commission chairman Jane Diplock said.

The commission said it had applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the current four directors. Under the Securities Act those applications must be made together.

The commission's main purpose in making them was to take the first step towards compensation for investors who invested under the September 7 2007 prospectus, which was amended on December 24.

A declaration of civil liability was conclusive evidence that could be relied upon by either the commission or investors themselves in any subsequent claims against the directors for compensation.

The commission would consider pursuing compensation claims in due course should it be in the public interest to do so.

The civil proceedings were filed on April 1 at the High Court at Wellington.

Investigations relating to Lombard Finance & Investments and its parent company Lombard Group (and their respective directors) were continuing and further proceedings were being considered, the commission said.

Lombard Finance & Investments went into receivership in April 2008 owing about $127m to 4400 investors. According to the receivers it is likely that secured debenture holders will receive less than 30 per cent of their investment back. Unsecured creditors are likely to receive no return.