Published 25 June 2007
The Securities Commission has accepted a new enforceable undertaking from contributory mortgage broker Contributory Mortgage Investments Ltd, its nominee company Contributory Mortgage Nominees Ltd, director John Martin & alternate director Ron Jamieson.
The commission accepted enforceable undertakings from Mr Martin & his 2 companies in February 2006 “to give CMI an opportunity to raise its standards of care & governance to the standards required of those who raise funds from the public. These undertakings included an agreement not to offer new mortgages. Subsequent oral undertakings extended the period of restraint on CMI offering new mortgages. CMI has not offered new mortgages to the public since September 2005.
“All the (8) mortgages remaining under its management are in default. It is endeavouring to sell the properties held as security for these mortgages and is taking some other steps to recover contributors’ funds. Some mortgages have been settled by CMI at a loss to contributors. 2 mortgages were removed from CMI’s management by the commission in December 2006. At the time of their removal investors were owed money.”
The commission said it continued to investigate CMI’s conduct and had concerns about aspects of the parties’ compliance with the law and conduct in the offer & management of contributory mortgages, including:
the legality of deductions made, or proposed, from sale proceeds of property held as security for the mortgages to pay CMI in priority to investorsthe adequacy of CMI’s disclosure about the risks of investment in some mortgages it offeredthe time taken by CMI to notify investors of borrowers’ defaults in some casesconflicts between CMI’s own interests and the interests of investors where funds are claimed by CMI or where CMI may have potential liability to investors for losses.
The commission said it was seeking a court opinion on certain legal issues, “in particular, the legality of CMI’s deductions from sale proceeds in priority over repayments to investors. The commission considers the interests of contributors will be best served by seeking this opinion before deciding whether or not to remove other mortgages from CMI’s management. This means the commission, rather than investors in individual mortgages, will incur the costs of determining investors’ rights to these funds.
The commission said both companies & both directors had acknowledged its concerns and had offered undertakings:
not to offer or promote securities until after 31 March 2008to keep all money received for the mortgages in trust, except for distributions to registered investors in proportion to investors’ contributions to the mortgage and some other lawful paymentsto have an independent chartered accountant audit the mortgage records and report to the commission each month on the distribution of money and whether funds are properly accounted forto provide information to the commission to help it in its legal proceedings.
19 December 2006: Securities Commission bans CMI from new lending for 4 months
1 March 2006: Van Nieuwkoop back in gun over securities law breaches
Attribution: Commission release, story written by Bob Dey for this website.