The legal pressure on the failed insurance group CBL Corporation and its former directors has increased with the Financial Markets Authority (FMA) filing two civil claims in the High Court.
The Authority’s allegations include multiple breaches of disclosure rules, misleading and deceptive conduct, and false information at the time the company was floated in 2015.
The cases have been taken against the company, six CBL directors, and its chief financial officer.
FMA general counsel Nick Kynoch said its main objective was to promote fair, efficient and transparent financial markets, and the size and circumstances of CBL’s collapse could not be ignored.
“We have identified a number of areas of potential misconduct by CBL and its directors and considered a range of potential enforcement actions against the backdrop of our regulatory objectives.”
CBL was worth about $750 million when it collapsed in 2018, after the Reserve Bank forced the liquidation of its insurance subsidiary over concerns about its financial strength.
Kynoch said the civil action was necessary to hold people to account for the alleged breaches, clarify the law, set a precedent, and send a deterrence message.
A court decision backing the FMA could allow affected investors to pursue compensation, while directors could personally be liable for penalties of up to $1m for breaches.
CBL Group founder and former chief executive Peter Harris, who was one of the six directors named by the FMA, said the action would be “vigourously defended”, as would any action arising from a continuing investigation by the Serious Fraud Office.
“The court is the proper forum for the claims to be litigated – rather than the public jockeying for position by the two litigation funders who are focussed on getting their place at the compensation trough ahead of anyone else and trying to settle without going to court.”
Harris and others are also subject to claims being made by two groups of investors.
Several large investment firms have joined forces in two class actions, backed by specialist litigation funders.
They want to recover investor losses, alleging former directors of misleading statements, failure to disclose key information, and insider trading in papers just filed in court.
The CBL Insurance company’s net liabilities have been put at somewhere between $25 million and $343 million.
This article was originally published on RNZ and re-published with permission.