The Financial Markets Authority has settled a civil claim against the directors and promoters of failed finance company Hanover Finance for $18 million just two weeks before it was due to be heard in court.
The money will be distributed to eligible investors who invested in the Hanover Finance Ltd (HFL), Hanover Capital Ltd (HCL), United Finance Ltd (UFL), in the period from December 7, 2007 to July 23, 2008, the FMA said in a statement this morning. The FMA filed the law suit in 2012 against Hanover owners Mark Hotchin and Eric Watson along with directors Greg Muir, Tipene O'Regan, Bruce Gordon and Dennis Broit.
The action alleged misleading and untrue statements were made in prospectuses and advertisements distributed by Hanover between December 2007 and July 2008 about the financial position of the companies in that period.
The defendants deny liability and dispute the FMA's claims but have reached a settlement that includes Hotchin, Muir, O'Regan and Gordon giving voluntary undertakings not to act as directors of a bank or non-deposit-taker until May 2018 without the FMA's written approval. Watson and Broit have given representations to the FMA that they do not intend, now or in the future, to act as directors of a bank or non-bank deposit-taker.
FMA chief executive Rob Everett said the decision to reach a settlement was very carefully considered within the FMA and with its legal advisers to determine how best to serve the interests of investors and the broader public. It was felt the settlement provided a better and earlier outcome for investors than going to court, he said.
"We wanted to provide certainty and some compensation to investors in the 2007 offer. We believe the compensation secured now is the best outcome for those investors. This payment is likely to be greater than any recovery that might have been available at the end of a trial," Everett said.
"The undertakings and representations provided by the defendants meet the FMA's regulatory objectives and hold the defendants to account.
"This ensures they will not be directors of bank or non-bank deposit takers for a period of time. Undertakings are used by the FMA to provide an element of protection for investors."
"We are comfortable this was the best deal we could get," Everett later told the
A estimated up to 5500 investors could receive some form of payout, with the first distribution hoped in October this year. The FMA is working with Deloitte to work out how much will go to each eligible investors in Hanover Finance, United Finance and Hanover Capital.
Everett said the Hanover case was about disclosure to investors and highlighted the importance of accurate disclosure and that investors are entitled to know the true financial position of any company where they have entrusted their money.
Read the full settlement deal here: