Showing posts with label securities commission. Show all posts
Showing posts with label securities commission. Show all posts

Thursday, April 14, 2011

Hanover Finance: Hotchin Ponzi Scheme Suppression; Investors failed by SFO & SEC

The lifting of name suppression yesterday for Mark Hotchin and Kerry Finnigan, a former director and chief executive of the Hanover Group on a case involving their "investment " of personal money in a ponzi scheme, opens up a number of questions for investors in the failed Hanover Finance that went bust in 2008, taking with it over half a billion of investors money.

Hotchin's lawyer, on Hotchin's instruction, at the time argued that disclosure of his name would inflict the following on Hotchin:

"There would be concern over the investment strategies adopted within the Hanover organisation because of the loss of credibility and damage to my reputation."

* "Investors and third parties with whom Hanover and its entities deal could well come to the conclusion that if one of the directors of Hanover was making inappropriate investment decisions personally then he could well be doing the same for the group. This in turn could cause a lack of investor confidence and support potential for a run on funds, the possible collapse or restructure of the group with obvious impact on its 600 employees."

* "The commercial relationship Hanover has with commercial partners would also be placed under stress. In those circumstances I anticipate that my fellow shareholder [London-based Eric Watson] and director could well request my resignation as a director."

Of course the claim that name disclosure for Hotchin would seriously affect the Hanover Group, in terms of lost investor confidence, may well have an element of truth to it but the main reason for the, until now, permanent name suppression, was self preservation on Hotchin's part, as the lifting of the suppression orders would have put a dent in his own ponzi scheme happening at Hanover Finance. NZ Herald, April 13 2011

The ponzi scheme that Hotchin lost money in promised 160% returns over 2 months, yes, you read that right a 960% annual return! The deals lacked paperwork and clear investment details and the recipients of the funds spent the money on personal items, like real estate, jewelry and extensive luxury travel - much like Hotchin and Eric Watson were doing with Hanover investors moola in fact.

The fact that Hotchin and Finnigan put their own money into this obvious ponzi scheme points at the risks they were taking with others money within the walls of Hanover's head office in Auckland. Clearly if investors knew about Hotchin's involvement in a get rich quick scheme they probably would not have piled more of their money into Hanover.

Disclosure of Hotchin and Finnegan's involvement in such a scam was clearly in the public interest then but the courts decided, wrongly in my opinion and probably in the opinion of most of us, to keep name suppression a permanent thing.

Judge Weir at the time stated:

"there is a failure also to identify any person or past person who would specifically benefit by publication of the details of the case".

It can be argued of course, as I have above, that those that would have benefited from lifting name suppression would have been prospective investors in Hanover.

Putting aside that poor judgement The Serious Fraud Office (SFO), that was directly involved in the case, and other legistlative arms of the State such as the Securities Commission (SEC) who are tasked with protecting investors from financially reckless individuals such as Hotchin and Finnigan, were happy to keep this kind of disclosure, that is normal in business, secret from investors.

The court judgement lay unchallenged by either the SEC or the SFO and therefore they failed in their duty to make investors aware of the poor judgement and financial ability and therefore the inability of Hotchin and Finnigan to be competent managers of other peoples money.

The New Zealand Herald should be congratulated for overturning what the SFO and SEC had no interest in.

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Friday, June 25, 2010

Bothered by Simon Botherway

I made some comments about potential conflict of interest at the Securities Commission (SEC) in April and Simon Botherway was on my list because of his directorship on Fisher & Paykel Appliances [FPA.NZ] board while also being a board member on the SEC.

In an interview this week on National Radio's Nine to Noon Mr Botherway was explaining his appointment as chairman of the new regulatory body, the Financial Markets Authority (FMA) set up to oversee our financial markets.

While much of what I heard was commendable, his comments didn't really excite me enough to make me think that the FMA would be a force to be reckoned with - Remember Mr Botherway has been on the board of the SEC when they have been about as effective as a wet bus ticket slapper (without the ticket) on errant financial offenders or preventing offenses in the first place.

Mr Botherway and his SEC have been of course behind the statutory management of Allan Hubbard and his Aoarangi Securities, a crackdown which has apparently come out of the blue and inconsistent with the SECs track record in terms of the aforementioned bus ticket slapping.

It turns out that this is where things get really interesting in terms of Mr Botherway and his capacity as the a SEC board member. has reported this morning that Mr Botherway has a conflict of interest of his own when it comes to his recommendation to send Mr Hubbard to Coventry:

A member of the Securities Commission (Mr Botherway) which recommended Allan and Jean Hubbard be placed in statutory management is also the brother of a businessman placed in receivership by South Canterbury Finance (SCF) last year.

Allan Hubbard is the owner of SCF.

Mr Bothwerway only disclosed his conflict yesterday:

Commission member Simon Botherway yesterday declared he had a "potential conflict of interest" in the Hubbard case as the brother of businessman Jonathan Botherway.

Jonathan Botherway's hospitality empire collapsed in July 2009 after SCF, which was then owed $7.8 million, put him in receivership.

Simon Botherway would not comment yesterday and instead referred questions to the commission.

Commission spokesman Roger Marwick said chairwoman Jane Diplock was made aware of the connection yesterday, five days after the recommendation was made to Mr Power, but did not believe there was a conflict on interest.

"Mr Botherway was on the division of the commission that recommended that Aorangi Securities Limited and associated persons be placed in statutory management. Mr Botherway has informed the commission of matters concerning a family member and South Canterbury Finance.

"This was done at the monthly meeting of the commission today in the context of declaring a potential conflict of interest in relation to South Canterbury Finance."

This is a clear conflict of interest on Mr Botherway's part and Jane Diplock has got it wrong when she says it isn't.

Mr Botherway needed to declare his conflict of interest before the SEC made its decision to put Mr Hubbard in statutory management and excuse himself from the process.

Perhaps there is no direct conflict of interest but the process has to be at least free of potential conflict.

Botherway should re-consider his position of chairman of the FMA. This incident over his brother and Mr Hubbard is a major oversight on his part and his inability to judge this correctly and excuse himself from the decision to put Mr Hubbard in financial limbo needs to be recognised by himself and by those that appointed him as below the standard for a person in his position.

When asked about his opinion on Mr Hubbard and the position he has found himself him in his Wednesday interview, Mr Botherway decided not to comment.

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c Share Investor 2010

Monday, April 19, 2010

Jane Diplock Q & A Interview

Further to a story I posted last week about the Securities Commission and the board's conflicts of interest and general all round ineffectiveness we had the head of the SEC Jane Diplock, being interviewed by Paul Holmes on Q & A last Sunday.

There were crocodile tears and sympathy from Jane for those that got ripped off by Finance Companies/fund managers/investment advisers, like Lombard, Hanover, Blue Chip, Five Star, ANZ, Money Managers, Glegg & Co, Capital & Merchant Finance, Strategic Finance, Nathans Finance and all the individual dogs associated with these companies and more.

But enough of the hand wringing. Those people want justice and that is what the SEC is there for. All we got was this wet dream:

"Paul, I think if you asked me what keeps me awake at night, it is precisely that people have lost this money, and that people's hopes and dreams have been destroyed and the fact that they've lost the capacity; very, very intelligent people who'd saved for their retirement are facing enormous challenges as a result of this disaster. And frankly that's the thing that motivates me and worries me more than anything, and that's why we need to take action to bring the people to book who actually cause these collapses. " Jane Diplock, Q & A April 18, 2010

Enough of the sympathy Jane, we actually want you to do something but instead you spend most of your time overseas when you should be here managing this mess in a more effective and timely manner.

Your public utterances are meaningless unless you back them up with evidence leading to prison sentences and reparations and so far you have failed on both counts.


Transcript of Interview
Securities Commission
Q & A
Full list of finance failures

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Thursday, April 15, 2010

Securities Commission needs a clean out

The resignation of Securities Commission director David Jackson over the non disclosure of the breaking of banking covenants by Nuplex Ltd [NPX.NZ] highlights what conflicts of interest other Securities Commission Directors might have.

I agree with Mark Weldon, NZX CEO, that directors on the commission need to be full time and independent. Currently they are neither. A bit rich coming from Mark though when his own NZX Ltd [NZX.NZ] has a number of conflicts of interest in the day to day running of the exchange.

The SEC commissioners (see below) hold a number of positions on NZX listed companies that put them in direct conflict with their positions on the commission.

Simon Botherway has a directorship on Fisher & Paykel Appliances [FPA.NZ]. Annabel Cotton has interests in listed funds manager Fisher Funds and Mark Verbiest is on the Freightways Ltd [FRE.NZ] board.

Unacceptable to the average investor like myself because as a person with a financial interest in a company you can hardly be expected to regulate without bias that company as a SEC director and also do the job of director at that company with a clear conscience should anything need your regulatory hand.

Both positions are therefore compromised.

I know it is a small pool of competent individuals from which we seem to choose and we expect people with experience in the field (and that means NZX listed company investors and directors) but I think any bias needs to be a criteria that has to be exceeded and weeded out at the interview process before an SEC director is employed and that means selling those shares and resigning those directorships.

It looks likely that the SEC is going to be disbanded soon to be replaced by another market watchdog and that gives politicians the perfect opportunity for a clean out of the dross at the SEC and the appointment of a watchdog that is squeaky clean, has more clout and is able to prosecute law breakers with quick, effective and meaningful punishment.

The alternative is more of the same insider stuff that pervades stockmarket investing in New Zealand, the continued compromise of investors and the stockmarket in general and a lack of confidence in a market by current investors and more importantly those new investors who would like to buy shares but see stockmarket investing as the wild west or old boys club.

The current Members of the Commission are

Jane Diplock AO BA (Hons), LL B, DipEd (Sydney), Dip Int Law (ANU), FIPAA, FNZIM
Chairman of the Commission since September 2001.
Professional: Barrister and Solicitor of the ACT Supreme Court and High Court of Australia, Barrister of the New South Wales Supreme Court; Fellow of the Institute of Public Administration of Australia;
Chevening Fellow at London School of Economics; Chairman of the Executive Committee of IOSCO;
Member of the Financial Crisis Advisory Group; Fellow of the New Zealand Institute of Management.

David Mayhew BA LLB Hons
Commissioner for Financial Advisers.
Professional: Professional: Barrister and Solicitor of High Court of NZ, Solicitor of Supreme Court England and Wales .

Simon Botherway CFA, B Comm
Professional investor.
Directorship: Fisher and Paykel Appliances Holdings Limited.

Shelley CaveLLB
Solicitor, Auckland
Professional: Partner of Simpson Grierson specialising in corporate and securities law.

Annabel M. Cotton BMS (Accounting and Finance), ACA, CSAP
Business Consultant, Hamilton.
Professional: Consultant to companies listed in New Zealand and overseas.
Directorships: Genesis Power Limited, Kingfish Limited, Barramundi Limited, Marlin Global Limited and a number of private companies.

Keitha Dunstan PhD (QLD), M Bus (QUT), Grad Dip Mgt (UCQ), B Com (QLD), CA, FCPA
Professor, Australia.
Professional: Head of School of Business, Bond University Australia.

Elizabeth Hickey M Com(Hons), FCA, MInstD
Professional: Chartered Accountant, Auckland.
Directorships: New Zealand Institute of Chartered Accountants.

John Holland B Com, LL B
Solicitor, Christchurch.
Professional: Partner of Chapman Tripp specialising in securities and competition law and mergers and acquisitions.
Directorships: Board member of Chapman Tripp.

Neville O. Todd B Com
Company Director, Wellington.
Directorships: Kinloch Funds Management Limited and its subsidiaries. Formerly a director of Milford Asset Management and Salomon, Smith Barney New Zealand Limited, and a member of the New Zealand Stock Exchange.

Mark Verbiest LLB
Company Director, Wellington.
Professional: Consultant Simpson Grierson
Directorships: AMP Haumi Management Limited (manager of AMP NZ Office Trust); Freightways Limited, Government Superannuation Fund Authority, Southern Cross Medical Care Society, Health Trust and related entities, Aptimize Limited (Chairman).


Securities Commission

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Wednesday, May 20, 2009

Good Morningstar

News out in New Zealand's Business media today about Morningstar's (incidentally a Berkshire Hathaway, Warren Buffett owned vehicle) ranking of our mutual funds sector and I would argue as a spin-off the NZ financial sector as a whole, should be of surprise to those who only read the sports pages and gossip and perhaps the hapless Mark Weldon, CEO of the NZX.

New Zealand ranked a D minus rating.

As far as my major sphere of interest goes, the stockmarket, I have been banging on about how "wild west" our stockmarket regulation and oversight have been in this respect for 10 years.

The guts from Morningstar for me:

Morningstar researchers evaluated and scored countries in six categories—investor protection, prospectuses and shareholders’ reports, transparency in sales practices and the media, fees and expenses, taxation, and distribution practices. Read full article PDF format

"Investor protection" and "transparency" are two major planks of my rantings and Morningstars.

Recent capital raisings on the NZX have been the latest outrage to be foisted on New Zealand stockmarket investors, with protection for large shareholders managed by the NZX and Securities Commission laws at the centre of capital issues but at the same time leaving smaller investors like my good self drowning in a pool of bile filled anger over being shafted once again.

Mark and his directors down in windy Wellington in that flash building on the waterfront and those not far from him at the Securities Commission should take note.

This time, these are your contemporaries saying this about you, not the investors that keep getting the blunt end of your regulatory axe and perhaps you might listen now that it is your buddies saying this?

One can only hope.

Until then the swirling bile will keep me critical.

The Rankings by Morningstar

United States: A
China: B+

Italy: B
Japan: B
Netherlands: B

Taiwan: B
Canada: B-
France: C+
Switzerland: C+
United Kingdom: C+
Australia: C

Singapore: C
Germany: C-
Hong Kong: C-
Spain: D
New Zealand: D-

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c Share Investor 2009