The charges have been laid against Neal Nicholls, Owen Tallentire, Colin Ryan and Robert Sutherland. Criminal charges have also been laid against Wayne Douglas, who resigned as a director in February 2007.
Capital + Merchant Finance went into receivership in November 2007 owing $167 million to some 7,000 investors. According to the receivers it is likely that none of this will be recovered.
"The Commission alleges that Capital + Merchant Finance's offer documents and advertisements misled investors by misrepresenting the investment risks, especially in relation to related party lending, insurance cover and liquidity," Commission chairman Jane Diplock says.
The Commission alleges that the directors made untrue statements in the registered prospectus and investment statement dated 15 August 2006, mainly in respect of related party lending and loan management. The Commission also alleges that the current four directors made similar untrue statements in the registered prospectus and investment statement dated 10 September 2007, as well as untrue statements about liquidity and cashflow and in the prospectus incorrectly stated that no loans were impaired and the company's financial position had not materially and adversely changed since its last balance date.
In addition, the Commission alleges that five advertisements distributed during 2007 contained untrue statements about insurance cover for capital secured debenture stock and some of the matters referred to above. These claims do not apply to Douglas who had resigned his directorship by then.
The Commission further alleges that Nicholls and Ryan knowingly misled the Commission.
Most of the criminal charges are laid under section 58 of the Securities Act and carry a maximum penalty of five years imprisonment or fines of up to $300,000. Criminal charges are also laid against Nicholls and Ryan under section 59A of the Securities Act and carry a maximum fine of $300,000.
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