The Financial Markets Authority (FMA) has completed a preliminary assessment of its investigation into the conduct of CBL Insurance, and has stated that it has concerns about potential breaches of the Financial Markets Conduct Act (FMC Act) and Companies Act.
The FMA has particular concerns regarding disclosures made as part of CBL’s initial public offer, continuous disclosures for matters arising from mid-2017, financial reporting and directors’ duties.
The regulator is also looking into the performance of the auditor, Deloitte, given its mandate in auditor oversight.
The FMA has stated that its primary objectives are “sending an important denunciation and deterrence message,” especially when it comes to misconduct in areas of strategic importance to New Zealand’s financial markets, as well as holding anyone guilty of misconduct to account and providing a legal precedent for any similar future actions that may arise.
It has been asked to consider exercising any potential right of action that shareholders may have under the Companies Act, but has stated that it has “not yet determined whether the use of this power would be appropriate.”
“The FMA remains focused on lifting standards of corporate governance, particularly given observations that poor corporate governance leads to poor disclosure by listed issuers,” the regulator stated.
“If it is considered that there has been a breach of director’s duties, the FMA will need to assess whether there is additional benefit in also pursuing directors for a breach of director’s duties under the Companies Act. Additionally, the FMA does not consider that it would be appropriate to exercise section 34 powers for the sole purpose of seeking compensation for shareholders.”
A complaint regarding CBL Insurance was brought to the FMA in 2015 by a businessman embroiled in a US investigation into “fraudulent” insurance sales. The FMA has declined to comment on whether the current investigation is related to allegations made in the 2015 complaint, however has stated that it is working with “the relevant overseas regulators,” and is continuing to liaise with RBNZ and the SFO.
Given the involvement of multiple regulatory agencies across several jurisdictions, as well as the complexity of the issues at hand, the investigation process is likely to continue for some time.