Whakatane-based Asset Finance still blocked from raising money from the public as FMA continues probe

By Gareth Vaughan

An interim order slapped on Asset Finance by the Financial Markets Authority (FMA) preventing it from raising money from the public has expired, but the regulator says the firm has agreed not to accept any public money until its inquiries are finished.

The interim order, issued by the FMA on April 13, lapsed on Friday. In the order the FMA said it was considering whether to cancel Asset Finance's prospectus and prohibit its investment statement.

An FMA spokeswoman confirmed to interest.co.nz that the stop order had expired. However, she said the FMA was "working closely" with Asset Finance's trustee, Covenant Trustee Company.

"Until our inquiries are complete, Asset Finance has agreed not to accept any further deposits or rollovers," she said.

Asset Finance's prospectus shows NZ$17 million worth of debenture stock on issue - at March 31, 2011 - and NZ$1 million worth of capital notes. The Whakatane-based Asset Finance offers personal and business loans ranging from NZ$400 to NZ$400,000. The company was founded by managing director Clive George and has branches in Auckland, Masterton, Palmerston North, Wellington, Rotorua, Wanganui, and Tokoroa. Asset Finance's auditor is Grant Thornton.

George told interest.co.nz the company had lodged a request for an amendment to be made to its prospectus to clarify the issue raised by the FMA.

"We can't open the prospectus (again) until we get the amendment okayed," George said.

The FMA spokeswoman declined to comment on the specific issues the regulator has with Asset Finance. However, George said the FMA's concern stems from a NZ$350,000 loan made by Asset Finance to Rexon Limited several years ago. Rexon was subsequently placed in liquidation in April 2009 at the petition of Steel & Tube Holdings with the Official Assignee appointed liquidator.

As of December 22 last year, Asset Finance said the net value of the loan was NZ$224,567. Although it wasn't earning any interest, the prospectus notes regular payments are being made monthly to reduce the principal without saying who is making them, although George recently told the Sunday Star-Times the payer is a trust associated with him.

The prospectus also notes that an entity controlled by George, which owns a 2005 Mercedes-Benz Atego custom built into a motor home, has pledged this asset as security against the Rexon loan and one other one being a loan with a net value of NZ$1.055 million made to the owner of a catamaran offering scenic tours in the North Island.

"Without this security, this (Rexon) loan would require a specific impairment allowance," the prospectus says. See a Rexon liquidator's report here.

The prospectus says the vehicle has a replacement value of between NZ$1.3 million and NZ$1.6 million and a valuation of NZ$950,000.

In its now lapsed interim order the FMA said it had made orders against Asset Finance under the Securities Act prohibiting the allotment of securities under both its registered prospectus for the issue of debenture stock, and under the company's investment statement, also for the issue of debenture stock. It was considering whether to exercise its powers under sections 43F and 43G of the Securities Act to cancel the prospectus and prohibit the investment statement on the grounds that;

"The investment statement is likely to deceive, mislead or confuse with regard to a particular that is material to the offer of securities to which it relates; and the registered prospectus is false or misleading as to a material particular or omits any material particular."

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