Why Hanover poster boy is not under FMA gun

Former TV One News presenter Richard Long is no longer in the Financial Markets Authority’s (FMA) sights as part of its Hanover legal action.

READ ALSO: My Hanover fears - Sir Tipene O'Regan

But the paid Hanover promoter may not have been so lucky if new financial markets laws proposed in the Financial Markets Conduct Bill (FMCB), currently at select committee stage, were in force.

The indication from the draft FMCB is that liability for false or misleading investment statements could be extended to more peripheral parties, such as celebrity endorsers, under a broader concept of “promoter”.

Under the current Securities Act legislation, the only people who are liable for advertisements are directors and a more narrowly defined class of ‘promoter’.

The FMA last week filed civil proceedings under the Securities Act against Hanover directors and promoters Eric Watson (promoter only), Mark Hotchin, Greg Muir, Sir Tipene O’Regan, Bruce Gordon and Dennis Broit.

FMA chief executive Sean Hughes last year said legal action against Mr Long, who appeared in the financier's advertising, was a possibility.

Mr Long was the television voice for Hanover advertising sponsorship and also appeared in newspaper ads promoting Hanover investment products.

The Advertising Standards Authority in 2008 upheld a complaint Mr Long’s scripted statement in one television advertisement was misleading: “This One Weather Update is brought to you by Hanover, a New Zealand business with the size and strength to withstand any condition,” the ad said.

Yet about 35,000 investors were affected when Hanover froze funds of $554 million in July 2008.

Yesterday the FMA told NBR Online Mr Long had been ruled out of legal action because of the technical definition of ‘promoter’.

The Securities Act defines a promoter as: “A person instrumental in the formulation of a plan or programme pursuant to which securities are offered to the public.”

It’s that definition which sweeps Eric Watson into the civil proceedings.

Mr Watson was not a director of Hanover but did sign the December 2007 prospectus under scrutiny.

It is understood the current draft of the FMCB, which passed its first reading last month, has a broader concept of a promoter, which could extend liability to indirect participants.

The FMA’s decision to launch civil rather than criminal proceedings against the Hanover businessmen is an indication it is focusing on returning money to out-of-pocket investors.

In order to win, and get the court to order the men to pay compensation to investors, the FMA will have to prove the allegedly misleading investment statements or advertisements gave investors confidence to put money into Hanover in good faith.

The FMA has narrowed the focus of proceedings to statements made in Hanover’s last prospectus (December 2007) and its March 2008 prospectus certificate.