FMA has released its first report (Inquiries Investigations and Enforcement Report 2012) on the key issues and themes that have emerged through FMA’s inquiries, investigations and enforcement activities over the last 12 months.

The report highlights FMA’s engagement with and oversight of the market on a wide range of matters including:

  • Failed finance company investigations;

  • Asset preservation orders (regarding the Hanover Group of companies);

  • Perimeter surveillance;

  • Financial advisers;

  • Offer of securities without prospectus;

  • Unsolicited offers;

  • Secondary markets issues (including delayed filing of substantial shareholder notices, which will be an area of focus for FMA in 2012-2013); and

  • Third party claims.

Finance company litigation

The report also provides commentary on some of the specific themes and issues arising from FMA’s recent finance company prosecutions: R v Moses and Ors (Nathans); R v Graham and Ors (Lombard); R v Petricevic and Ors (Bridgecorp). FMA notes that these cases "have sent a clear message to the issuing corporate community that the law imposes on them clear responsibilities to ensure the accuracy and adequacy of their disclosure documents". In particular, FMA notes that these cases illustrate that:

  • more is required of directors than mere honesty. A director cannot form a reasonably held belief, if they do not know enough to form a proper view on whether or not the documents contain untrue statements;

  • directors are expected to have an understanding of the fundamentals of the business and of financial reporting (and the level of financial literacy required of a director of a finance company is arguably likely to be higher);

  • disclosure obligations are assessed by an overall impression conveyed by offer documents not a painstaking analysis of individual statements;

  • directors must review the statements in disclosure documents from the point of view of a prudent but non-expert person, setting aside their own insider knowledge; and

  • the obligation not to make misleading or untrue statements in offer documents is not a delegable duty.