The Reserve Bank says car and personal lender Avanti Finance has been fined NZ$15,000 in the Auckland District Court for breaching the Reserve Bank of New Zealand Act by failing to have the required two independent directors on its board.
Reserve Bank Deputy Governor Grant Spencer said the fine came after Avanti pleaded guilty. He said it was important for non-bank deposit takers such as Avanti Finance to be familiar with their directors’ outside interests.
“Sound governance is a key aspect of the non-bank deposit taking regulatory regime," Spencer said.
"The requirement to have two independent directors is pivotal in strengthening this sector and avoiding the issues experienced by some finance companies in recent years. As a result, it is important that non-bank deposit takers are aware of their directors’ interests, to ensure they meet the Reserve Bank requirements to have two independent directors on their boards."
Avanti's latest prospectus, which seeks up to NZ$30 million through the issue of secured debenture stock, notes its two independent directors are Paul Bravo and June McCabe, a former senior manager at Westpac. The prospectus says the Reserve Bank had given Avanti an exemption permitting Bravo and McCabe to also be directors of its subsidiary Galatos Finance. However, on July 13 this year the Reserve Bank served proceedings on Avanti, claiming breaches of the conditions relating to the exemption.
The prospectus notes that Bravo, along with Avanti's chairman Stephen Eltringham, had been the directors of the corporate trustee, Malamute Investments, for the business trust associated with Mr Eltringham that owns 50% of Avanti's parent company, G&S Investments. Bravo had also been a G&S director since 2007.
After the Reserve Bank granted an exemption allowing Bravo to remain as a director of both Avanti and Galatos, but not G&S, Bravo resigned as a G&S director and Malamute ceased being the corporate trustee for Eltringham's business trust. Bravo was also a director and 25% shareholder of Avanti related party GPS Mortgages. On November 15 Bravo resigned his Malamute and GPS directorships and sold down his GPS stake to 10%, the prospectus says.
Avanti then advised the Reserve Bank of these changes on November 30.
"The Reserve Bank nevertheless decided to prosecute Avanti. The maximum penalty for a breach of section 157L of the Reserve Bank Act is a fine not exceeding NZ$1 million. Avanti considers that in such circumstances any penalty that might be imposed would be moderate," the prospectus adds.
"The directors' consider that any breach of the Act was an oversight which in no way affected their ability to make decisions with the best interests of Avanti in mind."
Avanti's trustee is Covenant Trustee Company and its auditor is PKF Ross Melville Audit. Meanwhile, the lender recorded a net profit after tax of NZ$6.8 million in the year to March 31, 2012. As of March 31 Avanti had loan receivables of NZ$81 million, debenture stock on issue of NZ$21.6 million, equity capital and retained earnings of NZ$31.6 million, and had drawn down NZ$27.9 million on a NZ$40 million ANZ loan that's due to mature in October 2014.
Avanti's CEO is Glenn Hawkins, who is also a major shareholder and the son of Allan Hawkins.