News Column

FMA Confirms Settlement with Strategic Finance Directors and Auditors

June 5, 2014



AUCKLAND, New Zealand, June 5 -- New Zealand'sFinancial Markets Authority issued the following news release:

The Financial Markets Authority (FMA) and the Receivers of Strategic Finance Limited (Strategic), John Fisk and Colin McCloy of PwC, have today announced that they have finalised a settlement with the directors and auditors of Strategic. Under the terms of the settlement the directors and auditors will pay to the Receivers of Strategic $22 million. This will enable the Receivers to make a further distribution to investors.

As part of the settlement, the directors have each provided FMA with an enforceable undertaking that they will not, without the prior written approval of FMA:

1. act as a director or promoter of a public issuer of securities for five years; or

2. accept appointment or employment or act as a Chief Executive Officer or Chief Financial Officer (or equivalent position) of a public issuer of securities for three years.

These undertakings are provided under s46 of the Financial Markets Authority Act 2011 and are available on FMA's website.

The directors who were the subject of FMA's claim and who have provided undertakings are Kerry Finnigan, Graham Edward Jackson, Marcel Aubrey Lindale, Timothy John Rich, Denis Grenville Thom and David John Wolfenden.

In February 2013, FMA announced that its investigation into Strategic had found that the directors are likely to have breached the Securities Act by making untrue statements in a registered prospectus, investment statement and in an advertisement between March 2008 and August 2008.

Separately, the Receivers have pursued claims against the directors, including under the Companies Act 1993, and against the auditors in respect of the 31 December 2007 audit.

"In reaching this settlement we are providing certainty and compensation to investors. We have also been mindful of avoiding a lengthy and costly court case, with potential litigation risk. The terms of the settlement deliver a strong deterrence message and include enforceable undertakings from the directors of Strategic not to act as a director of an issuer of securities to the public for 5 years," said FMA Director of Enforcement and Investigations, Belinda Moffat.

"While the directors do not admit liability, FMA remains of the view that they are likely to have breached their disclosure obligations under the Securities Act.

"However, given the limited personal assets of the directors, this settlement represents the best outcome for investors in the circumstances," said Ms Moffat.

The settlement resolves all claims as between FMA, the Receivers, liquidators, trustees, directors and auditors. The settlement sum will be paid over the next 6 months to the Receivers, who will distribute funds to investors in the same manner that the Receivers will distribute proceeds from the realisation of assets in the receivership. While this was a lengthy and complex process it is noted that the directors co-operated with FMA's investigation.

A copy of the Enforceable Undertakings can be found here[http://www.fma.govt.nz/laws-we-enforce/enforcement/enforceable-undertakings/enforceable-undertaking-from-strategic-finance-directors/].

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