The Securities Commission has laid criminal charges against the directors of Dominion Finance and North and South Finance, including founders Terry and Ann Butler and prominent savings industry lobbyist Vance Arkinstall.
The Securities Commission said Dominion Finance's offer documents and advertisements misled investors about the risks involved and the quality of its loans. It also said directors had made false statements in the prospectus for Dominion Finance.
The Securities Commission announced in a statement it had laid criminal charges and issued civil proceedings against Dominion Finance Group Limited and North South Finance Limited directors Vance Arkinstall, Richard Bettle, Terence Butler, Ann Butler, Paul Forsyth and Robert Barry Whale.
It said the charges followed extensive investigations since Dominion Finance Group went into receivership on 9 September 2008 owing about NZ$176.9 million to some 5,900 investors.
Receivers say investors are likely to get back less than 25% of their money. Unsecured creditors are likely to get nothing.
The charges will bring some comfort to around 200,000 investors who have seen around NZ$6.7 billion frozen in 57 finance companies and investment funds since May 2006, Interest.co.nz's Deep Freeze list shows. Receivers estimate investors are likely to lose around half of the money frozen in the funds. Many investors are angry at the time it has taken to investigate and prosecute company directors involved.
"The Commission alleges that Dominion Finance Group's offer documents and advertisements misled investors by misrepresenting the investment risks, especially in relation to related party transactions, lending standards, loan quality and impairment, liquidity and the company's overall financial position," Commission Chairman Jane Diplock said.
"The Commission also alleges that North South Finance's offer documents and advertisements misled investors in relation to related party transactions, liquidity and the company's overall financial position," she said.
The Commission alleged 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 stated that the relevant company's financial position had not materially and adversely changed since the company's last balance date and that the prospectus was not misleading by failing to properly refer to adverse circumstances.
The Commission said it had alleged this was false and that the directors' statements misled investors. "In addition, the Commission alleges that a quarterly newsletter of Dominion Finance Group and a letter to the investors of both Dominion Finance Group and North South Finance distributed during 2008 contained similar untrue statements about the financial position of the companies."
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