6 March 2014
Prudential Mortgage Limited, a contributory mortgage broking firm, has been convicted and fined $2,000 for failing to deliver its annual report to the Registrar of Companies by 30 June 2013. Prudential pleaded guilty to the charge laid by the Financial Markets Authority (FMA).
The charge against Prudential was brought under the Securities Act (Contributory Mortgage) Regulations. The maximum fine is $5,000. The conviction was entered in the Christchurch District Court on 5 March.
Reporting and disclosure by contributory mortgage brokers, including in annual reports, allows investors and potential investors to understand the details of the broker’s financial position.
FMA Head of Enforcement, Belinda Moffat, said: “This case is a timely reminder to those taking investments from the public of the importance of full and accurate disclosure of financial information to investors, and that there are consequences of failing to comply with this fundamental obligation.”
“Ensuring accurate and timely disclosure to investors and promoting compliance with reporting obligations is a key priority for FMA, and prosecution is one of the tools available to FMA to encourage compliance,” Ms Moffat said.
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The Regulations are made under the Securities Act and regulate the offer to the public of interests in contributory mortgages and prescribe the requirements relating to the management of such interests.
Under a contributory mortgage, a number of investors contribute to a larger sum, which is then advanced to borrowers.
Regulation 12 of the Securities Act (Contributory Mortgage) Regulations requires contributory mortgage brokers to deliver an annual report to the Registrar of Companies. The annual report must comply with the Regulations and must include audited financial statements.
In the case of individuals, the annual report must be delivered not later than the 31st day of May each year. In the case of contributory mortgage brokers who are not individuals the annual report must be delivered not later than 3 months after the end of the contributory mortgage broker’s financial year.
Regulation 41 provides that a contributory mortgage broker, or the director of a contributory mortgage broker, commits an offence if they fail to comply with the Regulations. This offence carries a maximum penalty of a $5,000 fine.
The implementation of the Financial Markets Conduct Act 2013 does not affect the requirement for contributory mortgage brokers to deliver annual reports under the Regulations i.e. the filing obligations on contributory mortgage brokers remain unchanged.