NZ's FMA settles with Hanover Finance

Failed property financier Hanover Finance Group has settled with New Zealand's Financial Markets Authority over claims it misled investors in 2007 and 2008.

Directors of Hanover Finance, which collapsed in July 2008 owing NZ$554 million to 16,500 investors, agreed to pay investors NZ$18 million. The settlement comes more than three years after the FMA launched civil legal action and froze the assets of founding director and owner Mark Hotchin.

The regulator claimed prospectuses and advertisements distributed by the Hanover Group between December 2007 and July 2008 misled investors about the Group's financial position.

The directors, including Hotchin, Greg Muir, Tipene O'Regan and Bruce Gordon, agreed to the settlement on the condition they denied liability and disputed the FMA's claims. They also agreed not to act as directors of banks or non-bank deposit takers before May 2018.

Fellow Hanover director Eric Watson did not contribute to the settlement payment, but has already undertaken not to act as a director of a bank or non-bank deposit taker.

FMA Chief Executive Rob Everett said the settlement provided a better and earlier outcome for investors than going to court. Court hearings were due later this month.

"We wanted to provide certainty and some compensation to investors in the 2007 offer," Everett said.

"This payment is likely to be greater than any recovery that might have been available at the end of a trial," he said.

"Any funds that may have been available for investors, from the defendants and their insurers, would have been largely reduced by the costs of a lengthy trial."

The settlement included the lifting of freezes on the assets of Hotchin.

The four directors said in a joint statement they believed the FMA claim would have failed in a trial as they had not breached the Securities Act. They added that any fair assessment of the case free of political interference would have led the FMA to drop the case.

"Hanover ceased business in July 2008 because of the effects of the GFC (global financial crisis) on Hanover's borrowers, not because of any mismanagement. We regret the loss of investors' money," the directors said.

"We decided to settle because of the cost and burden of litigation lasting for many more years, and because our insurers and former insurance broker made it possible to provide a payment which will go to the investors," they said.