Civil Proceedings Served on Lombard Finance & Investments Directors

(Media releases from the Securities Commission)
13 April 2010

The Securities Commission has issued civil proceedings under the Securities Act against Lombard Finance & Investments directors Sir Douglas Graham, Michael Reeves, William Jeffries and Lawrence Bryant.

These proceedings follow extensive investigations by the Commission since Lombard Finance & Investments went into receivership on 10 April 2008 owing approximately $127 million to some 4,400 investors. According to the receivers it is likely that secured debenture holders will receive less than 30% of their investment back. Unsecured creditors are likely to receive no return.

"The Commission alleges that Lombard Finance & Investments' offer documents and advertisements misled investors by misrepresenting the investment risks, especially in relation to liquidity, the quality of the loan book, adherence to credit policies and the company's overall financial position," Commission Chairman Jane Diplock says.

The Commission alleges that the directors made false statements in the registered prospectus dated 7 September 2007, as amended by a memorandum of amendments dated 24 December 2007, and investment statements dated 28 December 2007. The documents stated the 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. However the Commission alleges this was false and the directors' statements misled investors.

In addition, the Commission alleges that a DVD advertisement distributed during 2007 and 2008 contained similar untrue statements about the financial position of the company.

The Commission has applied for declarations of civil liability and civil pecuniary penalties of up to $500,000 against each of the current four directors. Under the Securities Act these applications must be made together.

The Commission's main purpose in making them is to take the first step towards compensation for investors who invested under the 7 September 2007 prospectus, as amended by a memorandum of amendments on 24 December 2007. A declaration of civil liability is conclusive evidence that can be relied upon by either the Commission or investors themselves in any subsequent claims against the directors for compensation. The Commission will consider pursuing compensation claims in due course should it be in the public interest to do so.

Investors can take their own civil compensation proceedings whether or not the Commission also has power to do so.

The civil proceedings are issued under section 55C and related sections of the Securities Act. They were filed on 1 April 2010 at the High Court at Wellington.

The Commission acknowledges the assistance of PriceWaterhouseCoopers, the Lombard Finance & Investments receivers, with this investigation.

As these proceedings are now before the Court it would not be appropriate for the Commission to comment further.

Ongoing investigations

The Commission is continuing its investigations in relation to Lombard Finance & Investments Limited and its parent company Lombard Group Limited (and their respective directors) and is considering further proceedings.

Ends

Contact: Roger Marwick ph 04 471 7659