Nathans guilty verdict sends strong message on director responsibilities - FMA

The Financial Markets Authority (FMA) has welcomed the High Court's verdict in its case against three directors of Nathans Finance. 

Directors Donald Young, Kenneth Moses and Mervyn Doolan were today found guilty of offences under section 58 of the Securities Act on the basis of untrue statements made in Nathans' 2006 prospectus and investment statement.

FMA chief executive Sean Hughes said Justice Heath's judgment sent a clear message of responsibility to issuers of securities and their directors.

"It makes clear that directors have a personal duty to ensure that disclosure documents and other advertisements do not mislead or deceive.

"That is a duty that cannot be delegated to staff or external advisers - the directors must form their own opinions."

Mr Hughes said accurate and timely information was critical to ensuring investors could make informed investment decisions and to participate confidently in New Zealand's financial markets.

"Today's decision has reinforced the responsibility that every director of an issuer has to provide truthful and complete information to investors," said Mr Hughes.

"This verdict will also send a clear signal to investors that it's safer to enter the markets, with greater policing of behaviour, and this will contribute to capital markets growth over time."

FMA alleged that the directors were responsible for untrue statements made in the registered prospectus and investment statement of Nathans in December 2006. The statements concerned lending to related parties (including Nathans' parent company VTL Group), and claimed that Nathans had no bad debts, that it had adequate liquidity, that its lending was diversified, that it made loans and managed them in accordance with robust policies and processes, and that all material matters had been disclosed in the prospectus.

A sentencing hearing is scheduled for 2 September. The charges, laid under section 58 of the Securities Act, carry a maximum penalty of five years imprisonment or fines of up to $300,000 plus $10,000 for every day the offence is continued.