The Securities Commission is seeking a court opinion to help protect investors in a failed contributory mortgage company.
It says that it is wearing the costs of the court case so the individual investors don't have to pay.
Wednesday, June 27th 2007, 6:59AM
The matter revolves around contributory mortgage broker Contributory Mortgage Investments (CMI), its nominee company and its directors John Martin and Ron Jamieson, who had previously made an enforceable undertaking with the commission.
The commission says undertakings from CMI, CMN and Martin in February 2006 gave "CMI an opportunity to raise its standards of care and governance to the standards required of those who raise funds from the public. These undertakings included an agreement not to offer new mortgages."
CMI has not offered new mortgages to the public since September 2005.
The commission says all the mortgages remaining under its management are in default. It is endeavouring to sell the properties held as security for these mortgages and is taking some other steps to recover contributors' funds.
Some mortgages have been settled by CMI at a loss to contributors and the commission removed two mortgages from CMI's management in December.
The commission continued to investigate CMI's conduct and has concerns about aspects of the parties' compliance with the law and conduct in the offer and management of contributory mortgages including:
the legality of deductions made, or proposed, from sale proceeds of property held as security for the mortgages to pay CMI in priority to investors;
the adequacy of CMI's disclosure about the risks of investment in some mortgages it offered;
the time taken by CMI to notify investors of borrowers' defaults in some cases
conflicts between CMI's own interests and the interests of investors where funds are claimed by CMI or where CMI may have potential liability to investors for losses.
The commission is seeking a court opinion on certain legal issues, in particular, the legality of CMI's deductions from sale proceeds in priority over repayments to investors. The commission says that it "considers the interests of contributors will be best served by seeking this opinion before deciding whether or not to remove other mortgages from CMI's management. This means the commission, rather than investors in individual mortgages, will incur the costs of determining investors' rights to these funds."
Further undertakings have been given to the commission including one that no securities offers will be made until after March 31, 2008.
