The Financial Markets Authority is aiming to decide before Christmas whether to lay prosecutions or drop five of its 16 remaining investigations into the "stench" caused by finance company collapses by Christmas.
In its first update on the finance company investigations since it took over four months ago from the Securities Commission, the new financial markets watchdog said it had dropped its investigations into six collapsed finance companies because it did not think any laws were broken, but was still investigating a further 16.
The six companies are; Geneva Finance, Mascot Finance, Strata Finance, All Purpose Finance (trading as St Kilda Finance), Direct Property Investments (No.6) and Finance & Leasing.
"In those six cases in which we have decided not to pursue our investigations, we have carefully assessed whether we have information suggesting unlawful behaviour; whether such information is sufficient to justify charges or proceedings; and whether it would be in the public interest to prosecute," said FMA chief executive Sean Hughes.
The FMA had not found any breaches or had any brought to its attention in the six cases, Hughes said.
Consistent with FMA's Enforcement Policy it has concluded there is no public interest in continuing its investigation, without sufficient cause.
The FMA continues to probe the following companies, involving about $3.45 billion of investor losses.
- Allied Nationwide Finance
- Boston Finance
- Equitable Mortgages
-OPI Pacific Finance (formerly MFS Pacific)
-South Canterbury Finance
-Strategic Finance (including Strategic Nominees)
"These cases have created a stench or a cloud over New Zealand's corporate regulations which we think is unmerited," Hughes said. "Realistically, I see the job of getting those matters to a point where we can make a decision on either laying charges or commencing proceedings is going to take the next couple of years," said Hughes.
It is likely to conclude investigations into five of the "most advanced" of the 16 cases before the end of the year, but has declined to name those companies.
The Financial Markets Authority has also closed its investigation into Rockforte Finance, after referring the matter to the Serious Fraud Office.
Should the SFO not proceed to prosecution, FMA may decide to reopen its investigation, Hughes said.
Rockforte Finance investors' capital is subject to a Crown guarantee, as are investments in Strata Finance and Mascot Finance. This means the Crown will compensate investors for their losses in part or in whole.
FMA announced in June that it had closed its investigation into Aorangi Securities (including Hubbard Management Funds) and referred the matter to the Serious Fraud Office.
The update on the finance company investigations comes 10 months after the FMA's predecessor, the Securities Commission, said it had initiated 50 investigations, prosecutions or referrals to other authorities in the wake of the sector collapse through the latter half of the decade.
Chairman Simon Allen said a failure of corporate governance was to blame for many of the failures, and the FMA's new regulatory procedures aim to address that hole.
Hughes said the FMA's priority was chasing cases where unlawful behaviour was wilful rather negligent.
The watchdog will also be open to cutting deals as part of the process, and Hughes said not all of its investigations will lead to charges.
"One shouldn't assume all of those matters will necessarily run to trial and may well be the defendants will approach us to secure an early compromise, and we would welcome those approaches," he said.
- NZ HERALD ONLINE / BusinessDesk