Archive | Securities Commission

Commission gets injunctions stopping Whimp share transfers

Published 25 March 2011

The High Court granted the Securities Commission interim injunctions yesterday to stop shares being transferred to limited partnerships associated with Bernard Whimp.

The commission said it was concerned the offers were misleading or deceptive in that they appeared at first sight to be made at above the market value of the shares, but the fine print disclosed the full payment wouldn’t be made for 10 years. The net present value of the offer was therefore much less than the nominal offer price.

The injunctions relate to the following offers, all dated around 15-18 March:

Carrington Securities LP, offer to buy shares in TrustPower LtdNZ Investment Securities LP, offer to buy shares in Vector LtdChase Securities LP, offer to buy shares in Guinness Peat Group plcCarlyle Securities LP, offer to buy shares in Contact Energy LtdEnergy Securities LP, offer to buy shares in DNZ Property Fund LtdFairfield Securities LP, offer to buy shares in Fletcher Building Ltd

Each of the partnerships and their general partner, Mr Whimp, are prohibited from acting on any acceptances they have received to those offers until further order of the court.

The commission’s allegation that the offers were misleading will go to a High Court hearing on Monday 9 May.

The commission said if the court determined that the offers were misleading it would seek to have them cancelled and any shares already transferred returned. If the court determined that the offers weren’t misleading, the shares could be transferred in accordance with the terms of the offer.

The commission said it would write to all shareholders who’d accepted a Whimp offer explaining the orders made and giving them the opportunity to write back saying they wanted to go ahead with their acceptance regardless of whether the court decided the offers were misleading.

The interim injunctions also prohibit any substantially similar offers being made and the court orders require the partnerships & Mr Whimp to provide the commission with information about these offers and other unsolicited offers made in December.

Earlier stories:

17 March 2011: New Whimp share offers more complicated

30 December 2010: Whimp’s latest discount bid is for Fletcher Building shares

10 September 2010: Tighter rules coming on directors & company registration

25 August 2010: Whimp gets 2.2 million DNZ shares with cut-price offer

3 August 2010: Banned director Bernard Whimp uses limited partnership to make cut-price offer on DNZ shares

U: The names behind the action, the week to 24 December 2006, part 6, Bernard Whimp banned

U: The names behind the action, the week to 6 March 2005, part 5, Whimp’s Yellow Box Public Storage folds, plus related liquidations & background

 

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Attribution: Commission release, story written by Bob Dey for the Bob Dey Property Report.

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Insured Group says “Nothing to do with us” as commission issues Lombard proceedings

Published 2 February 2011

Insured Group Ltd – the former Lombard Group Ltd – beat the Securities Commission to the gun yesterday, issuing a release complaining that the commission was issuing proceedings relating to the company’s former ownership. Hours later, the commission put out its own release, without acknowledging the change of ownership.

Perth-based Australian Consolidated Insurance Ltd completed the reverse takeover of NZX-listed Lombard Group Ltd last year, under which existing Lombard shareholders received an interest in an unlisted vehicle, equal to their interest in Lombard, that contained Lombard’s residual assets. Australian Consolidated, founded by Wayne Miller in 2005, shifted its businesses into the listed company and took control of 98.5% of Lombard, renaming it Insured.

The reverse takeover offer came in 2009 as Lombard faced suspension by NZ for not presenting its annual report on time. Lombard itself used Pure NZ Ltd to achieve a backdoor listing in 2005, and Pure NZ director Dave Wallace stayed on with the new entity. His fellow directors were 2 former Cabinet ministers, Sir Douglas Graham as independent chairman & Bill Jeffries as an independent director, and PR company director Laurie Bryant. Chief executive Michael Reeves also became a director.

Through the reverse takeover, that NZ-incorporated company was removed from the New Zealand register in April 2010 and the incorporation was shifted to Perth. “It operates in the insurance sector and its current shareholders are almost entirely Australians who did not own Lombard Group at the material time” the new Insured said in its complaining release yesterday.”

As that was happening, the Securities Commission got civil proceedings underway against Sir Douglas Graham, Mr Jeffries, Mr Bryant & Mr Reeves. After further investigation, the commission added the company to the proceedings yesterday, alleging breaches of its continuous disclosure obligations.

Insured Group said in its release: “The company understands the allegations relate to an alleged failure in early 2008 for the company to adequately disclose the impact on the company of the financial position of its then subsidiary, Lombard Finance & Investments Ltd. The company understands the Securities Commission is seeking, among other things, orders that the company pays the Crown a pecuniary penalty (which due to the change in the relevant statutory provisions during the relevant period is expressed to amount to up to a maximum of $1.3 million).” Mr Miller added: “At the time of the reverse takeover offer in 2009 & 2010 I had not received any notice from the Securities Commission regarding potential continuous disclosure proceedings in relation to Lombard Group. Insured Group in its current form has had nothing to do with the 2008 business position of Lombard Finance & Investments or Lombard Group. “It is extraordinary that the Securities Commission has never discussed this matter with us, nor provided details of the allegations beforehand so we might have an opportunity to respond before the Securities Commission took the court action that it has. I am advised that, even where there is a case to answer, the remedies the Securities Commission is seeking are discretionary and I simply cannot understand how a court would seek to penalise the current Australian owners of the company. The Securities Commission must have been well aware of the significant transformation of our company created by the reverse takeover offer and has waited almost 3 years to take action which could potentially penalise the current Australian owners. “The group’s assets today have no connection with the finance company operation in 2008. The residual assets of the company from the period during which Lombard Finance & Investments was a subsidiary were excluded from the reverse takeover transaction in 2010 and were transferred to a newly formed company (First One Holdings Ltd) owned by the original Lombard Group shareholders in the same proportion as their then shareholding in Lombard Group. “The Securities Commission has already taken different proceedings in relation to Lombard Finance & Investments’ operations (which are still to be heard) so we cannot understand why it is taking this particular action now some 3 years after the relevant events occurred and when the changes to the company effected by the reverse takeover were fully advised to New Zealand regulators last year before the company migrated its place of incorporation to Australia. This does little to engender confidence in the New Zealand capital markets, which is particularly disappointing for us as a company that sought to be listed in New Zealand, in contrast to the developing trend of companies leaving the NZX for other exchanges.” Mr Miller said the commission’s action only concerned the parent company, not its operating subsidiaries in Australia. The commission said it had begun civil proceedings alleging breaches of the continuous disclosure provisions of the Securities Markets Act in 2007 & 2008.

Investigations & litigation director Sue Brown said: “The breaches relate to the company’s failure to disclose information to the market, such as loan book quality & liquidity, regarding the performance of its finance company subsidiary, Lombard Finance & Investments. The information the company failed to disclose was material as Lombard Finance & Investments constituted a major part of Lombard Group’s business, and Lombard Group was financially dependent on its subsidiary.

"Compliance by listed companies with their continuous disclosure obligations is vital to the integrity of the capital markets. The commission therefore considered this case warranted the current proceedings."

When Lombard Finance & Investments went into receivership in 2008, it owed $127 million to 4400 investors. They’ve got back 9.5c:$1 so far, and the latest report by the receivers, on 21 December, indicates that if the whole Inland Revenue claim is accepted the investors’ total return is likely to be in the range of 11-20c:$1.

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Attribution: Company & commission releases, Companies Office records, story written by Bob Dey for the Bob Dey Property Report.

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Securities Commission lays criminal charges against Huljich

Published 19 November 2010

The Securities Commission confirmed yesterday that it had laid criminal charges against Huljich Wealth Management (NZ) Ltd & director Peter Huljich over the Huljich KiwiSaver Scheme for which they are promoters.

The commission alleges Mr Huljich & Huljich Wealth Management misled prospective investors by misrepresenting the investment performance of the scheme’s funds in offer documents. The offer documents contained graphs comparing the Huljich KiwiSaver Funds’ investment performance to competing KiwiSaver funds, but failed to disclose that the Huljich performance figures included related-party payments made at Mr Huljich’s direction. Those payments had a significant impact on the Huljich KiwiSaver Funds’ investment performance figures.

The commission also alleges Mr Huljich made untrue statements in the scheme’s registered prospectuses, which included summary financial performance information but failed to disclose the related-party payments.  “The registered prospectuses also stated that the financial statements were prepared in accordance with New Zealand generally accepted accounting practice, and complied with NZ equivalents to international financial reporting standards and other applicable New Zealand financial reporting standards, although the financial statements didn’t comply with NZ IAS 24 related party disclosures.”

The commission alleges that the misleading & false statements were made in the scheme’s registered prospectus dated 22 August 2008 as amended on 13 February 2009, the registered prospectus dated 18 September 2009 and investment statements distributed during the period 1 May 2008-25 January 2010. 

The criminal charges have been laid summarily under section 58(3) of the Securities Act, which carries a maximum penalty of 3 months’ jail or a $300,000 fine, and under section 59(1)(c) of the Securities Act, which carries a maximum penalty of a $300,000 fine.

The first call of the charges will be in the Auckland District Court on Friday 14 January.

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Attribution: Commission release, story written by Bob Dey for the Bob Dey Property Report.

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IHC subsidiaries in statutory management over sleepover bill

Published 5 October 2010

The Government placed 2 subsidiaries of IHC NZ, Idea Services Ltd & Timata Hou Ltd, into statutory management today.

Commerce Minister Simon Power said the companies approached the Securities Commission asking to be placed into statutory management in light of uncertainty as to their continued ability to provide services arising from Employment Court rulings last year. Those rulings concerned the application of minimum-wage legislation to carers engaged in sleepover duties.

The Employment Court ruled last year that the companies had to pay an hourly rate ($12.50/hour) for sleepover time, but they’d been paying only a $34/night shift allowance. The IHC’s appeal to the Appeal Court will be heard on Thursday 28 October.

Mr Power said: "I am advised that IHC, as the parent organisation, is not affected and there is no suggestion of fraudulent or reckless conduct.

"Rather, statutory management is simply intended to preserve the provision of services by the companies pending the resolution of the litigation & subsequent negotiations."

The Ministries of Health & Social Development fund the companies to perform a range of services for disabled people & their families. They are registered charities.

The Government appointed former ANZ National Bank Ltd chief executive & director Sir John Anderson as statutory manager of the companies. It has also appointed a committee to advise the statutory manager – the chief executive of IHC & the 2 companies, Ralph Jones; IHC national president & Idea Services director Donald Thompson; and IHC national vice-president & Idea Services director Shelley Payne.

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Attribution: Ministerial release, story written by Bob Dey for the Bob Dey Property Report.

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Nelson financiers Harding & Scholfield give undertakings to Securities commission – which just happen to bolster their litigation claim

Published 16 July 2010

3 years after receivers were called into Nelson financier LDC Finance Ltd, 2 local business partners who tried to save it with a $4 million equity injection, Andrew Harding & Murray Scholfield, have given the Securities Commission an undertaking never to manage a company or offer securities again.

 

One of Mr Harding & Mr Scholfield’s partnerships, Finance & Investments (F&I), was closely involved in LDC transactions and also went into receivership in September 2007, exiting in 2008 after paying $8.4 million (including interest) to LDC Finance.

 

The dealings of Nelson accountancy firm Carran Miller Ltd and of a group of companies’ associated with it, including LDC companies – financing, prospectuses, fund transfers, receiverships – were investigated by Dermot Nottingham, who made numerous allegations about various accountants & directors in hundreds of pages of reports for investor Peter Mytton.

 

Securities Commission general counsel Liam Mason said today the commission had accepted enforceable undertakings from Mr Harding & Mr Scholfield, who offered securities to the public through F&I without an investment statement or registered prospectus.

 

Under the terms of the undertaking, Mr Harding & Mr Scholfield agreed not to take part in the management of any company at any time in the future, and not to offer or promote an offer of securities at any time in the future.

 

Mr Mason said the F&I partnership was established in 1973 and operated as an entity which provided vehicle, commercial & property finance to approved borrowers, taking deposits from the general public to fund its lending.

 

The receivers of LDC Finance, Malcolm Hollis & John Fisk (PWC), said in their latest report, in May, they’d repaid $9.1 million to investors and held the $8.4 million that came from F&I, plus interest, but were awaiting the outcome of litigation brought by F&I before it could be paid out. The receivers said the estimated return to unsecured creditors remained at 60-70c:$1 but depended on the outcome of the litigation. Secured investors are still owed $3.7 million plus interest.

 

The hold on the $8.4 million is because Mr Harding & Mr Scholfield are seeking its return so they can pay their own partnership creditors, including people who had money on deposit. The admission by the 2 men that they were operating in breach of the Securities Act has 2 sides to it – the upside for them that, although they will be unable to run another business, they also haven’t incurred any other penalty; but the potential downside for LDC creditors, brought in a new cause in the litigation by the informal trustees, that LDC knew, or should have known, of this breach.

 

The extension of that argument is that Mr Harding & Mr Scholfield effectively held funds in trust on behalf of their depositors and didn’t own those funds in their own names, so the funds belonged to those depositors, not to the 2 men, their partnership or LDC. In response, the receivers said LDC would argue F&I provided warranties that it complied with all relevant legislation.

 

The case has yet to go to trial. Meanwhile, the receivers said, money available to unsecured creditors was likely to be diluted because the interest rate being paid on the money they held was lower than the rate owed to secured creditors. The receivers said if they were successful at trial they would counter-claim against Mr Harding, Mr Scholfield & their trustees for the interest differential.

 

Mr Harding & Mr Scholfield are still directors of Cedar Holdings Ltd & Trafalgar Project Ltd. However, both companies are in the process of being wound up.

 

Earlier story, 5 September 2007: Receivers move into Nelson financier LDC, troubled all year

 

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Attribution: Commission release, company documents, story written by Bob Dey for the Bob Dey Property Report.

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Securities Commission files criminal & civil actions against Dominion Finance directors

Published 9 July 2010

The Securities Commission has laid criminal charges and also issued civil proceedings against Dominion Finance Group Ltd & North South Finance Ltd directors Vance Arkinstall, Rick Bettle, Terry & Ann Butler, Paul Forsyth & Barry Whale.

 

Commission chairman Jane Diplock said on Wednesday: “These proceedings follow extensive investigations by the commission since Dominion Finance Group went into receivership on 9 September 2008 owing $176.9 million to some 5900 investors.  According to the receivers, it is likely that secured debentureholders will receive less than 25% of their investment back. Unsecured creditors are likely to receive no return.

 

"The commission alleges that Dominion Finance Group’s offer documents & advertisements misled investors by misrepresenting the investment risks, especially in relation to related-party transactions, lending standards, loan quality & impairment, liquidity and the company’s overall financial position.

 

"The commission also alleges that North South Finance’s offer documents & advertisements misled investors in relation to related- party transactions, liquidity & the company’s overall financial position."

 

The commission alleges that the directors made false statements in the Dominion Finance Group registered prospectus dated 13 September 2007, as amended by an extension certificate 20 December 2007, and the North South Finance registered prospectus dated 11 September 2007, as amended by an extension certificate 20 December 2007.

 

Each extension certificate said the relevant company’s financial position had not materially & adversely changed since the company’s previous balance date and that the prospectus was not misleading by failing to properly refer to adverse circumstances. However, the commission alleges this was false and that the directors’ statements misled investors.

 

In addition, the commission alleges that a Dominion Finance Group quarterly newsletter and a letter to the investors of both companies distributed during 2008 contained similar untrue statements about the financial position of the companies.

 

The criminal charges laid under section 58 of the Securities Act carry a maximum penalty of 5 years’ jail or fines of up to $300,000. They were laid in the Auckland District Court on 4 June. 

 

The commission has applied for declarations of civil liability & civil pecuniary penalty orders of up to $500,000 against each of the directors.  Under the Securities Act, these applications must be made together.

 

Ms Diplock said the commission’s main purpose in making these applications was to take the first step towards compensation for investors who invested under the September 2007 prospectuses, as amended by the extension certificates on 20 December 2007. “A declaration of civil liability is conclusive evidence that can be relied upon by either the commission or investors themselves in any subsequent claims against the directors for compensation. The commission will consider pursuing compensation claims in due course, should it be in the public interest to do so.

 

“Investors can take their own civil compensation proceedings, whether or not the commission also does.”

 

The civil proceedings were issued under section 55C & related sections of the Securities Act and were filed on 3 June in the Auckland High Court.

 

Ms Diplock said the commission was continuing its investigations in relation to Dominion Finance, North South & their parent company, Dominion Finance Holdings Ltd (& their directors) and was considering further proceedings.

 

Earlier stories:

1 December 2008: North South Finance moratorium approved

17 October 2008: Dominion Finance appoints administrators

12 September 2008: One trustee sends receivers into Dominion Finance Group, second trustee lets North South moratorium proceed

7 May 2007: North South boosts Dominion Finance result

21 February 2006:

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2006 Coatesville investment scheme leads to jail & ban for Timaru advisor Cant

Published 15 June 2010

Former Timaru-based investment advisor Neville Cant was jailed for 14 months & fined last week on Securities Act charges and has been banned from operating as an advisor, investment broker or director for 5 years.

 

He is also banned from acting as an employee or agent of an investment advisor or broker in any way that would allow him to give investment advice, or receive investment money or investment property from a member of the public. As a consequence of his Crimes Act convictions, Mr Cant is also banned from being a director & manager of any company for a period of 5 years.

 

The Securities Commission took action against Mr Cant after receiving a number of complaints regarding investment schemes he established.

 

The ban is an automatic result of Mr Cant’s conviction under the Crimes Act of crimes involving forgery & theft by a person in a special relationship. Mr Cant & 2 of his companies, Investment Management Ltd & Combined Financial Services Ltd, were found guilty of offering & allotting securities without a registered prospectus & investment statement for The Gables proportionate ownership scheme at Coatesville in 2006, as required by the Securities Act.

 

The Gables Ltd was to raise finance through an offer of equity securities, to acquire then manage the property at 11 Donaldson Drive, Coatesville, and to take a stake in the intended tenant, Sue McCarty’s life coaching business Via NZ Ltd. Combined Financial Services, a financial service provider with investment clients, and Aoraki were promoters of the offer.

 

The Gables Ltd was declined resource consent in July 2006 to use the 2.9ha property for a life coaching retreat.

 

On top of his jail sentence & bans, Mr Cant was ordered to pay $100,000 reparation on the 2 Crimes Act charges and was fined $40,000 on each of the 2 Securities Act charges.  His companies were fined $14,000 each on each of the 2 Securities Act charges.

 

Mr Cant is still listed as a director of Aoraki Property Investments Ltd, Castaway Beach Ltd, Cook CFS Ltd, Combined Financial Services Ltd, Investment Management Ltd, Lagoon Lodges 1 Ltd, Lagoon Lodges Properties Ltd (wound up 19 April), Manuia Beach Ltd & The Gables Nominee Ltd, and is a former director of Andrew Baxter Drive Properties Ltd, Bute Road Properties Ltd, Castaway Properties NZ Ltd, Claremont Holdings Ltd, Earnslaw & Dee Ltd, Evans Bay Properties Ltd, Grafton Irrigation (2005) Ltd, Lagoon Lodges Properties Two Ltd, Mersey & Tweed Ltd & Vivian Zeal Investments Ltd.

 

29 July 2009: Charges follow 2006 investment proposal for The Gables at Coatesville

 

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Attribution: Commission release, story written by Bob Dey for the Bob Dey Property Report.

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Jackson quits commission after Nuplex proceedings filed

Published 16 April 2010

Commerce Minister Simon Power said Securities Commission member David Jackson resigned immediately after it was announced civil proceedings were to be filed against him in his role as a director of Nuplex Industries Ltd.

 

The Securities Commission said on Tuesday it was filing civil proceedings against the company, 5 current directors & one former director for breach of its continuous-disclosure obligations for 2 months just over a year ago. It’s the first continuous-disclosure case the commission has brought.

 

Mr Jackson was appointed to the commission in June 2005.

 

Earlier story:

14 April 2010: Securities Commission files proceedings against Nuplex & 6 directors

 

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Attribution: Ministerial release, story written by Bob Dey for the Bob Dey Property Report.

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Third ban for Pedlar’s Inertialess finance-raising efforts

Published 5 February 2010

The Securities Commission has banned a document offering shares in Inertialess Drive ZPE (2010) Ltd (Ken Pedlar, Mt Maunganui) because no prospectus has been registered and there’s no investment statement.

 

It’s rotor technology inventor Mr Pedlar’s third ban – the first was in 1998, when the company was Inertialess Drive Technologies (1995) Ltd, the second in 2000, for Inertialess Drive Corp Ltd. Each time the ban has been for an unregistered prospectus. Inertialess Drive’s share register disclosed that 1200 people had paid more than $6.8 million for shares between October 1998-March 2000.

 

The Securities Commission said in a release yesterday it understood offer documents were sent to people who responded to advertisements by the company in the Bay of Plenty Times in December. I saw the ads in the NZ Herald, seeking a response from people who’d responded to earlier Inertialess offers.

 

Earlier story:

26 September 2000: Inertialess Drive ban

 

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Attribution: Commission release, story written by Bob Dey for the Bob Dey Property Report.

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