Insured Group must front up for Lombard, says lawyer

Insured was now responsible for any alleged breaches of the stock exchange rules that Lombard Finance may have committed in 2008. Photo / Supplied

The Securities Commission's case against Insured Group, the company that took over the Lombard Group last year, may seem unfair but it is a logical move, a leading Auckland lawyer says.

The commission announced this week that it had begun proceedings against Insured, a Perth-based insurance company, for alleged continuous disclosure breaches relating to Lombard in 2008.

Insured made a back-door takeover of Lombard in March 2010, and the allegations relate to its subsidiary Lombard Finance.

Chapman Tripp partner Roger Wallis said the obligations of a listed company remained the same as before a takeover.

He said Insured was now responsible for any alleged breaches of the stock exchange rules that Lombard Finance may have committed in 2008 - two years before Insured bought the subsidiary.

"It is quite logical. It is unfortunate for Insured that they did not turn their minds to this."

Wallis said although the commission did not specifically inform Insured it was investigating Lombard Finance, it did inform the market.

This also opens Insured up to investors who, if they can prove they lost money through Lombard Finance, may be able to lay civil claims against the insurer.

"This should be a warning to companies to do due diligence before back-door takeovers. They [companies] take on the liabilities of the listed company. The key is a listed company is a listed company, and it continues to follow the consequences [of the previous company]. It is an unusual case but a logical one.

"It may seem unfair but the regulator [the commission] has been criticised for not enforcing the law enough."

Insured did not return the Business Herald's call yesterday but released a statement on Tuesday saying Insured has nothing to do with the 2008 business position of Lombard Finance or the Lombard Group.

The commission is seeking a penalty of $1.3 million for the alleged continuous disclosure breaches.

Insured managing director Wayne Miller said in the release that Lombard was once headquartered in Wellington but today it was based in Perth and almost all its shareholders were Australian.

"The Securities Commission has already taken different proceedings in relation to Lombard Finance's operations, which are still to be heard. So we cannot understand why it is taking this particular action now, some three years after the relevant events occurred, and when the changes to the company effected [Lombard] by the RTO [reverse takeover] were fully advised to New Zealand regulators."