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Broker warns regulators had better be right over Hubbard

Heads should roll at the Securities Commission if the severity of its action relating to South Canterbury Finance founder Allan Hubbard proves to be unwarranted, says John Kidd, the head of research at broking firm McDouall Stuart.

Thursday, June 24th 2010, 4:13PM 11 Comments

"If investigations identify little more than oversight or laxness by Hubbard, the Commission will face intense pressure to justify the severity of its recommended course of action," said Kidd in a note to clients that lamented the impact of losing the Hubbard empire's activities as an active investor in both NZX-listed stocks and the rural economy. 

"Equity capital access for New Zealand companies will inevitably suffer from this action," said Kidd, who feared the impact on the economic recovery if a loss of confidence in South Canterbury Finance - not part of the statutory management but in the throes of debt restructuring - were to cause its collapse. 

The "intense rumour, speculation and uncertainty" that would ensue until the statutory management announced on Sunday was resolved was also "precisely what the market - and particularly the finance company sector - does not need right now as it struggles to recover." 

"Along with the direct cost of appointing statutory managers, valuable Securities Commission, Companies Office and Serious Fraud Office resources will now be tied up for the next few weeks and months seeking to unearth evidence of criminal intent.  

"If it all comes to little or nothing, the Securities Commission will need to take a long, hard look at itself and ask how it justified the mobilisation of so much resource for so little reward when there remain numerous directors and executives of failed companies that are far more deserving of timely investigation and justice," Kidd said. 

"If Hubbard's actions are revealed as criminal and/or deceitful, many, many people (including us) will be shocked," he said. "If the Securities Commission has got it wrong and regulatory over-reaction is instead revealed, such will be the extent of unjustified, negative market impact that swords should be fallen upon." 

Hubbard's primary investment vehicle, Hubbard Churcher Trust Management, is "a very significant and active participant in the local equity markets with holdings in at least 75 of the 150 companies listed on the NZX."  

The firm had also been a "strong and consistent supporter of local early-stage companies - a layer of the local capital markets that is desperately thin."

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Comments from our readers

On 25 June 2010 at 7:13 am goldenfox said:
Fully agree.

It is amazing the vengence demonstrated towards Hubbard.

Clearly this has political motivations behind it. What does Key, English and Co. gain by this?

How did Hanover, Strategic, Blue Chip etc all avoid this level of scrutiny when they had every financial analyst in this country loudly questioning the business models they operated?

So many questions - just wish we had journalists the level of other nations to dig into the deep issues this action raises.
On 25 June 2010 at 8:36 am Bill Joyce said:
Conflict of interest and tall poppy syndrome all rolled into one
On 25 June 2010 at 8:36 am Malcolm Tarbotton said:
Simon Power has used a sledge hammer to hammer in a panel pin.
On 25 June 2010 at 8:54 am Ronald A Palmer said:
Should the Boffins at the Securities Commission who recommended placing Allan Hubbard in statutory management be proved wrong or only some knit picking small minded fault found, they should be publicly exposed, instantly dismissed and any golden parachute or redundancy payments that may have been due paid over to South Canterbury Finance to compensate partly for the damage they have done. Further,those senior members of Cabinet should be demoted to the bank benches and Treasury made to pay compensation to SCF
On 25 June 2010 at 9:24 am Anne said:
Here is a person who has always upheld the highest standards, supported his community and answered questions - yet he's had this action taken, without it would seem, just cause.
Yet if you don't take responsibility for your actions, tie it all up in trusts and still live a millionaire's lifestyle, you get away with it. Where is the natural justice in this?
On 25 June 2010 at 10:00 am Don Baxter said:
I endorse the comments by Ronald A Palmer above. The actions of the Securities Commission appear extreme --if the investigation does not reveal intentional complex criminal fraud (& I believe it will not) the abuse of executive power by the Commerce Commission must be seriously addressed.
On 25 June 2010 at 11:34 am admin said:
THE SECURITIES COMMISSION SAYS
NO CONFLICT OF INTEREST

An article in Fairfax Media publications this morning wrongly reports that Simon Botherway has declared a "potential conflict of interest" in relation to Mr Allan Hubbard.

Mr Botherway has declared to the Commission that he may have a potential interest in matters relating directly to South Canterbury Finance Limited because of previous business dealings between his brother and that company. The statutory management order does not apply to South Canterbury Finance Limited.

On this basis, the Commission is satisfied that Mr Botherway does not have a conflict of interest in relation to Aorangi Securities Limited, Mr or Mrs Hubbard, or the charitable trusts that were the subject of the Commission's recommendation for statutory management.
On 25 June 2010 at 1:16 pm C McMillan said:
Why hasn't this level of scrutiny been given to Dominion Finance who has stolen hundreds of thousands of dollars from its investors and only paying out up to 10% of the money invested!! What happened to all the rest?
On 25 June 2010 at 1:39 pm Paul said:
Given the extreme level of scrutiny applied to MP's expenses, no one should be in any doubt of the level of scrutiny that will now be commonplace for anyone using public funds or raising funds from the public. The trust the public require is essentially the same in either case.
On 25 June 2010 at 8:08 pm R Wallace said:
From the press announcements, its obvious that Simon Power did not know about the conflict of interest. Hubbard is not in the same leaque as the real crooks like those outwardly robbing kiwis like Blue Chips Mark Briers. Some smells bad about this witch hunt and I only hope someone exposes the real motives behind it.
On 1 December 2010 at 9:15 pm john denley said:
i have been a client of allan hubbard for 54 years and have full trust in his honesty. i have voted national for many years and had full trust in their decsions, until now, have i been too trusting in the manor of their treatment in dealing with mr and mrs hubbard basicaly finding them guilty without a trial. is there a hiden agender' i sincerely hope the truth does come out to allow retired elderly people the chance to live their final years with some security with their hard earned savings and not fund lawyers and government departments pockets
Commenting is closed

 

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