Insured Group criticises Securities Commission

Perth-based Insured Group, formed through the reverse takeover of Lombard Group last year, has criticised the Securities Commission for taking years to start civil proceedings over alleged breaches by the failed finance company in 2008.

The Securities Commission is seeking up to $1.3 million in penalties in over Lombard's alleged failure in early 2008 to adequately disclose the impact of the financial position of its then-subsidiary Lombard Finance and Investments (LFIL).

The commission began civil proceedings against four former Lombard directors last April after LFI went into receivership in 2008 owing $127m to 4400 investors.

"Compliance by listed companies with their continuous disclosure obligations is vital to the integrity of the capital markets," said commission investigations and litigation director Sue Brown.

"The commission therefore considered this case warranted the current proceedings," she said, noting the investigation had been long and complex.

Insured Group managing director Wayne Miller said the commission gave no indication of the potential proceedings over Lombard Group during the time of the reverse takeover and had waited almost three years to take action.

In 2008, the company was a Wellington-based holding company for a New Zealand-owned finance company, as opposed to its current incarnation as an Australian-owned insurance company whose current owners had no interest in Lombard Group during the relevant period.

"It is extraordinary that the Securities Commission has never discussed this matter with us, nor provided details of the allegations beforehand so that we might have an opportunity to respond before the Securities Commission took the court action that it has," Mr Miller said.

"This does little to engender confidence in the New Zealand capital markets, which is particularly disappointing for
us as a company that sought to be listed in New Zealand, in contrast to the developing trend of companies leaving the NZX for other exchanges."

In March 2010, Australian Consolidated Insurance began the process to reverse list on the New Zealand stock exchange through the then shell-company Lombard Group and move its headquarters to Australia.

Lombard's residual assets were excluded from the transaction and transferred to newly formed company First One Holdings.

The remedies the commission was seeking were discretionary even if the case was proved, Mr Miller said.

"We will be seeking further legal advice once we receive the full papers from the Securities Commission and will update our shareholders accordingly."

The company's operating subsidiaries in Australia were unaffected.