The Serious Fraud Office (SFO) has filed criminal charges in relation to the collapsed company, CBL Insurance, while the Financial Markets Authority (FMA) has filed civil proceedings against its parent, CBL Corporation (CBLC).
The SFO's charges follow an investigation it did with the Reserve Bank, which oversaw CBL Insurance because it held an insurance licence in New Zealand.
The SFO wouldn't detail its allegations, saying its policy is to wait until the first court appearance.
Meanwhile, the FMA has filed two proceedings against CBLC and its six directors and chief financial officer.
The FMA alleges directors Peter Harris and Alistair Hutchison, and CFO Carden Mulholland, breached the Financial Markets Conduct (FMC) Act by not disclosing the right information during the company’s initial public offering (IPO) in 2015. CBLC was listed on the NZX. The FMA alleges:
a) failure to disclose related party transactions; and
b) false and/or misleading statements in respect of solvency ratios and the use of the IPO proceeds.
The FMA, in a second proceeding, accuses Harris, Hutchinson and Mulholland, as well as directors John Wells, Anthony Hannon, Norman Donaldson and Ian Marsh of:
a) failure to comply with continuous disclosure obligations in respect of:
i. the need to strengthen CBLI’s reserves;
ii. aged SFS premium receivables following the acquisition of SFS; and
iii. directions issued to, and conditions imposed on, CBL Insurance Europe dac (CBLIE) by the Central Bank of Ireland (Central Bank); and
b) misleading and deceptive conduct and/or unsubstantiated representations in trade in respect of CBLC’s market announcement on 24 August 2017.
CBLC had a market capitalization of $747 million when the trading of its shares was suspended in February 2018. The company was put into voluntary administration in February 2018, and then placed in liquidation in May 2019.
CBL Insurance was put in liquidation in November 2018.
FMA General Counsel, Nick Kynoch, said: “Our key statutory objective is to promote and facilitate the development of fair, efficient and transparent financial markets. There will be corporate failures in a well-functioning market, however the size and circumstances of CBL’s collapse threaten our overarching objective. Because of this, we conducted a significant and complex investigation into CBL’s failure.
“We have identified a number of areas of potential misconduct by CBL and its directors and considered a range of potential enforcement actions against the backdrop of our regulatory objectives. We are also mindful of bringing an appropriately targeted and manageable case. The proceedings filed today address these objectives.
“We also acknowledge the two litigation-funded class actions filed by investors against CBL, which are primarily aimed at securing compensation for investors. The FMA will engage with investors and the courts to manage the various proceedings now in progress.
“Investors exercising their own legal rights and pursuing privately funded litigation plays an important part in a well-functioning market, which the FMA strongly supports. However private civil litigation may not always address areas of broader public interest that are of concern to the FMA.”
The FMA drafted two sets of proceedings separately for ease of understanding, as each one relates to different underlying facts and different time periods. However, it proposes the proceedings be heard together in the Auckland High Court.
See these stories for background on CBL.
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