FMA Reaches Agreement With CBL Corporation And Four Independent Directors On Continuous Disclosure Breaches

The Financial Markets Authority - Te Mana Tātai Hokohoko - has reached agreement with CBL Corporation Limited (In Liquidation) (CBLC) and four of its former directors in respect of the FMA's claims of continuous disclosure breaches and misleading conduct.

The four directors to reach agreement are Sir John Wells (who was Chair of the CBLC Board of Directors), and Tony Hannon, Paul Donaldson, and Ian Marsh (each of whom was an independent non-executive director of CBLC) (together referred to as the Independent Directors).

The FMA has entered into in court settlements to resolve its claims on terms acceptable to the FMA and these parties. A penalty hearing before the High Court in Auckland will take place in due course.

CBLC was listed on the NZX Main Board in 2015. It had a market capitalisation of $747 million, and a share price of $3.17, when trading of its shares was halted and then suspended in February 2018. The company was put into voluntary administration in February 2018, and then placed in liquidation in May 2019.

The FMA filed two proceedings in 2019 alleging breaches of the Financial Markets Conduct Act 2013.

The first proceeding relates to the documentation supporting CBLC’s initial public offer in 2015 (the IPO Proceeding). This proceeding is brought against CBLC, Peter Harris (Managing Director), Alistair Hutchison (a former non-executive director),[1] and Carden Mulholland (former Chief Financial Officer), but not against the Independent Directors. The IPO Proceeding has not settled.

The second proceeding, which CBLC and the Independent Directors have agreed to settle, relates to CBLC, as a listed entity, failing to disclose material information to the market during 2017 and 2018 (the Continuous Disclosure Proceeding). The FMA has alleged, in particular, that:

1. CBLC failed to comply with its continuous disclosure obligations in relation to:
   1. the need for its primary operating subsidiary, CBL Insurance Limited (In Liquidation) (CBLI), to strengthen its reserves;
   2. the existence and impact of a large amount of aged receivables (insurance premiums owed but not paid) in respect of business originated by Securities and Financial Solutions Europe SA, a French insurance business; and
   3. directions issued to and conditions imposed on CBLC’s subsidiary in Ireland, CBL Insurance Europe dac, by the Central Bank of Ireland; and
2. CBLC engaged in misleading and deceptive conduct and/or made unsubstantiated representations in trade in respect of its market announcement on 24 August 2017.

Margot Gatland, FMA Head of Enforcement, said: “The FMA is progressing an in court settlement with CBLC and the Independent Directors in the Continuous Disclosure Proceeding, the next stage will be a penalty hearing. However, that proceeding still continues against Peter Harris, Carden Mulholland and the Estate of Alistair Hutchison. The IPO Proceeding is also ongoing. The trial for these proceedings is set down for April 2024.”

[1]Mr Hutchison died in December 2021, but the claim continues against his Estate.

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