The Ombudsmen's Office is investigating the way in which Securities Commission member Simon Botherway raised a potential conflict of interest over the affairs of South Canterbury businessman Allan Hubbard.

In June, Mr Hubbard's company Aorangi Securities, seven charitable trusts, Mr Hubbard and his wife, Jean, were put into statutory management on the recommendation of the Securities Commission.

The finance company that Mr Hubbard founded, South Canterbury Finance (SCF), was not included in the statutory management, although it has since gone into receivership.

Late in June, the Securities Commission said in a statement that Mr Botherway had declared that he may have a potential interest in matters relating directly to SCF because of previous business dealings between his brother and that company.

The commission was satisfied that Mr Botherway did not have a conflict of interest in relation to Aorangi Securities, Mr or Mrs Hubbard, or the charitable trusts in statutory management.

In reply to a question from Labour MP David Cunliffe today, Commerce Minister Gerry Brownlee confirmed that Mr Botherway had raised the potential conflict of interest over SCF on June 24.

"There was no formal declaration of potential for conflict, but there was clearly - and I am not familiar with the circumstance - a discussion. Everyone knows that," Mr Brownlee said.

"The most salient point is that legal advice was sought by the commission, which confirmed that there was no conflict of interest."

In light of the Ombudsman's investigation, the parties involved would be acting with all caution and prudence, he said.

The Ombudsmen's Office is investigating whether the commission's decision to make a recommendation to Mr Brownlee may have been affected by any undisclosed potential conflict of interest on the part of Mr Botherway.

"What I am proposing to investigate is the reasonableness of the commission's policies and procedures relating to the disclosure of actual and potential conflicts of interest, and the extent to which these procedures were followed in this case, having regard to the requirements of the Crown Entities Act 2004 and the Controller and Auditor-General's good practice guide on managing conflicts of interest," Chief Ombudsman Beverley Wakem said in a letter.

She had written to commission chairwoman Jane Diplock asking for a report and all relevant information relating to the complaint from Hubbard supporter Paul Carruthers and others.

Mr Botherway is also the chairman of the Financial Markets Authority Establishment Board which is creating a new integrated financial markets regulator.

Last week, two further trusts established by Mr Hubbard were put into statutory management, and yesterday the same action was taken with two more companies linked to him.