FMA: Settlement gives investors more

An $18 million settlement negotiated with the former directors of Hanover Finance, Hanover Capital and United Finance is a better outcome than would have been achieved through court, the FMA says.

Monday, July 6th 2015, 9:59AM

It announced the deal this morning, two weeks before its civil case was due to be heard in court.

The money will be distributed to eligible investors who invested in the Hanover finance companies in the period from December 7, 2007 to July 23, 2008 – the period the FMA says it had the strongest case on, and in which conduct raised the most concerns.

It is believed about 5500 investors are affected but those who feel they may have a claim are asked to contact Deloitte, which will build an investor database. The Hanover Finance Companies did not go into liquidation or receivership.

The first payments are expected in October.

In the civil proceedings, the FMA claimed that prospectuses and advertisements distributed by HFL, HCL and UFL between December 2007 and July 2008 were misleading about the financial position of the companies in that period. The defendants deny liability and dispute the FMA’s claims.

In addition to the settlement payment, Mark Hotchin, Gregory Muir, Tipene O’Regan and Bruce Gordon, directors of the Hanover finance companies, have given voluntary undertakings not to act as directors of a bank or non-bank deposit-taker until 1 May 2018, without the prior written approval of the FMA. A breach of the undertakings can be enforced by the FMA through the courts.

Watson and Broit, the directors of HGL, 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. Watson did not contribute to the settlement.

FMA chief executive Rob Everett said the regulator wanted a better outcome than would be achieved through a trial. He said he felt the best return possible for investors had been achieved. He said the trial would have taken two years or more. “this ia better and earlier outcome… we believe if it went to trial the money that is on the table would have been seriously diminished and could be gone altogether.”

He acknowledged the undertakings from the directors were less than could have been achieved through a management ban in the courts.

Secured investors in Hanover Finance can expect to receive 14c to 18c in the dollar, United Finance secured stock holders can expect 16c to 20c and Hanover Capital bondholders 5 to 7c in the dollar.

The investigation cost about $3.5 million and took 10,000 hours of staff time.

READ THE FULL SETTLEMENT

Tags: finance companies FMA Hanover