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Four independent directors of the failed insurer CBL Corporation (CBLC) have been ordered to pay $4.1 million by the High Court for breaching financial rules on disclosure.
The Court approved a deal reached between the Financial Markets Authority (FMA) and Sir John Wells, the chairperson of CBL, Tony Hannon, Paul Donaldson, and Ian Marsh.
Wells, Donaldson, and Marsh were each penalised $1m, and Hannon $1.1m because he was judged to have a higher level of culpability for one breach.
The decision of Justice Gault called the actions of the directors reckless or careless and precisely what the disclosure laws were trying to prevent.
“The conduct was completely inconsistent with promoting the confident and informed participation of business, investors and consumers in New Zealand’s financial markets.”
“Investors were wholly unaware of the escalating problems at CBLC.”
The FMA took action over market disclosures in 2017 and 2018, that failed to show the need for financial strengthening of a subsidiary, did not disclose overdue payments, and orders from Ireland’s central bank.
A further penalty of $5.78m against CBL Corporation was ordered by the court, but FMA said it would not be pursued to allow it to be used to repay creditors.
FMA head of enforcement Margot Gatland said it would hold companies and directors if they were not open, fair and transparent in disclosing relevant information.
“As the court made clear, the contraventions in this case denied investors access to accurate and timely information and the impact on the market was very serious.”
The CBL collapse has triggered various other legal cases, with a civil case involving shareholders and liquidators against the directors settled for $72.5m.
The FMA is still pursuing disclosure breaches action against the former chief executive, Peter Harris, and chief financial officer Carden Mulholland, and a separate action against the pair and now deceased former director Alistair Hutchison for documentation when the company floated on the stock exchange in 2015.
Charges of fraud, theft, forgery and deception brought against Harris and Mulholland brought by the Serious Fraud Office were dismissed by the High Court in September, which the Crown is appealing.
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