The DomPost reported a promising explanation by FMA chief executive Sean Hughes' of its withdrawal of civil proceedings inherited from the Securities Commission against the Lombard directors.
''We need to focus our energy and resources on the most serious areas of misconduct, and against perpetrators who set out to deliberately mislead or deceive innocent parties,'' Hughes said.
That is a pretty good test for most regulatory agency action. Litigation is expensive and risky. In the aftermath of a boom many financial bets will go wron without anyone having been dishonest. But it takes genuinely powerful people and bodies to resist the public and political clamour for prosecutions and other punitive litigation.
There are plenty of worthy targets who have been dishonest. The FMA would do well to ration its resources by applying that test to most of its current workload, however disppointing that will be to those who just want revenge for having lost money.
I've posted on this issue frequently. Given this promising start by the FMA I would not be surprised if they eventually drop their criminal prosecutions too, at least against some of the Lombard directors and others against whom criminal prosecution is self defeating. I hope those against Rick Bettle and Vance Arkinstall are among them.
Put this week's announcement by Minister Power that cartel behaviour will be criminalised into the same category – a grandstanding action to mimic Australia, and likely to reduce respect for competition law when it can not be enforced as readily as the current law . The Commerce Commission's recently forged weapon of the leniency assurance is of much greater effect and relevance. I had no hesitation in saying that to Hamish Rutherford from Fairfax/Stuff. Try googling cartel criminalisation for overwhelming a mass of criticism of the just announced law change.
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Hughes comments may sound good, but both he and his predecessor should in fact have placed a far greater emphasis on those in our society that cannot defend themselves. While I may feel sorry for those who have lost money in finance companies and the likes of Blue Chip they at least had a choice as to where their money was placed.
This is however not the case for many people who derive income from charities, estates and trusts that are at the mercy of the decisions of the Trustee. For example; if you go to the charities commission site and look up the estate of a Jack Swindells you will see in the 2008 accounts that the NZ Guardian Trust invested $40,000 into their own CashPlus fund on the 18th Aug 2008. At that point this CashPlus fund had over 35% of it's assests frozen in an associated mortgage fund, even though CashPlus was not allowed to invest in such a fund and there had been no announcement that it was invested in this mortgage fund. This is a clear breach of Trust as well as the breach of securities law. Mr Hughes predecessor decided not to prosecute and I understand that Mr Hughes has endorsed that position.
I agree that revenge should not be persued. However, those who hold an unparalled and unique position of trust and responsibility should be persued with the utmost vigour when they knowingly and deliberately break the law.