CBL Corporation Limited (CBLC), which was placed in liquidation in May 2019, and four of its former directors have been ordered by the High Court to pay penalties for continuous disclosure and misleading conduct breaches.
In a release by the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko, the regulator announced: “Following a penalty hearing in the High Court in Auckland on December 4, Justice Gault has declared CBLC and the four directors breached the fair dealing and continuous disclosure provisions under sections 22 and 270 of the Financial Markets Conduct Act and imposed pecuniary penalties.”
Referring to ex-CBLC board chair Sir John Wells and former independent non-executive directors Tony Hannon, Paul Donaldson, and Ian Marsh, the FMA went on to note: “Sir John Wells, Mr Donaldson, and Mr Marsh were each ordered to pay the jointly submitted penalties of $1 million; Mr Hannon was ordered to pay the jointly submitted penalty of $1.1 million.”
Due to his “elevated culpability” in respect of one of the breaches, Hannon was handed a higher penalty.
“CBLC was ordered to pay the jointly submitted penalty of $5.78 million,” the watchdog said. “Because the company is in liquidation, the FMA will not seek to enforce payment of the penalty so that CBLC’s assets can be used to repay creditors and investors as much as possible.”
Justice Gault’s decision was released today. In it he stated: “The present case is the epitome of what the fair dealing provisions and continuous disclosure regime are designed to prevent.” It was pointed out that the defendants’ conduct was “completely inconsistent” with promoting the confident and informed participation of stakeholders in the financial markets in New Zealand.
“This is the first case brought under the continuous disclosure provisions of the Financial Markets Conduct Act and shows that the FMA will hold to account companies and directors for breaches of continuous disclosure,” FMA enforcement head Margot Gatland said.
“Disclosure is a fundamental obligation which ensures New Zealand’s listed capital markets are efficient, transparent, and fair, and that there is equality of information in the market. 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.”
CBLC was accused of failing to comply with its continuous disclosure obligations in relation to the need for its subsidiary CBL Insurance Limited to strengthen its reserves; the existence and impact of a large amount of aged receivables in respect of business originated by French insurance firm Securities and Financial Solutions Europe SA; and directions issued to and conditions imposed on CBLC subsidiary CBL Insurance Europe dac by the Central Bank of Ireland.
It was also the FMA’s allegation that CBLC engaged in misleading and deceptive conduct in respect of a market announcement in August 2017.
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