CBL Managing Director Admits Continuous Disclosure And Fair Dealing Contraventions And Agrees Enforceable Undertaking

The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has reached agreement with former CBL Corporation Limited (In Liquidation) (CBLC) managing director Peter Harris on claims relating to continuous disclosure breaches and misleading conduct (the Continuous Disclosure Proceeding).

The Continuous Disclosure Proceeding relates to CBLC, a listed entity, failing to disclose material information to the market during 2017 and 2018. The FMA alleged that:

• CBLC failed to comply with its continuous disclosure obligations in relation to:
• the need for its primary operating subsidiary, CBL Insurance Limited (In Liquidation), to strengthen its reserves;
• 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
• directions issued to and conditions imposed on CBLC’s subsidiary in Ireland, CBL Insurance Europe dac, by the Central Bank of Ireland; and
• CBLC engaged in misleading and deceptive conduct in respect of its market announcement on 24 August 2017.

The FMA and Mr Harris have entered an in-court settlement to resolve the Continuous Disclosure Proceeding on terms acceptable to both parties. A penalty hearing before the High Court in Auckland will take place in due course.

In addition to admitting to contraventions of the Financial Markets Conduct Act 2013, Mr Harris has also offered to provide, and the FMA has agreed to accept, an Enforceable Undertaking that he will not hold any management or directorship positions with any listed issuer or licenced insurer and will not participate in any regulated offer in New Zealand. The duration of this undertaking is until the final determination by the courts of the relief sought by the FMA in its separate proceeding alleging failures in disclosure during CBLC’s initial public offering in 2015 (the IPO Proceeding) (including any appeals).

FMA Head of Enforcement, Margot Gatland, said: “The FMA took these civil proceedings in the public interest to meet our regulatory objectives, including to hold significant misconduct to account by several directors and officers of CBLC. We are satisfied this agreement to move to a penalty hearing, with in-court admissions of contraventions, and the management restrictions to which Mr Harris is now subject, meets our objectives at this time in relation to Mr Harris and the Continuous Disclosure Proceeding.”

Background 

The FMA filed two proceedings in 2019 alleging breaches of the Financial Markets Conduct Act 2013, namely the Continuous Disclosure Proceeding and the IPO Proceeding.

In December 2023, the Court made pecuniary penalties orders against CBLC and its four former independent directors in the CD Proceeding after they admitted continuous disclosure and misleading conduct breaches.

The Continuous Disclosure Proceeding continues against former CBLC chief financial officer Carden Mulholland, as does the IPO Proceeding. The IPO Proceeding is brought against CBLC, Mr Harris, Mr Mulholland and the estate of former non-executive director Alistair Hutchison.* A trial for these proceedings is set down for June 2024.

The defendants have settled separate civil proceedings brought by shareholders and liquidators for a sum of $72.5 million, which includes a personal contribution by Mr Harris. Approximately 53% of that settlement sum has been or will be paid to CBLC shareholders who participated in the proceedings. The settlement was entered into without any admission of liability by the defendants and the sum is payable on behalf of CBLC and all of CBLC’s directors.

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.

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