Perth-based Insured Group has expressed surprised over the NZ Securities Commission’s legal action against it for allegedly failing to disclose ongoing information on the Lombard acquisition.

The commission said in a statement last week that the breaches relate to Insured Group failing to disclose items such as loan book quality and liquidity of its subsidiary Lombard Finance and Investments.

It has alleged the information Insured Group failed to disclose was material, as Lombard Finance constituted a major part of Lombard Group’s business and it was financially dependent on its subsidiary.

Insured Group MD Wayne Miller says he understands the allegations relate to an action by Lombard in early 2008 – two years before his company engineered a reverse takeover of the collapsed NZ finance company.

“At the time of the takeover in 2010 I had not received any notice from the Securities Commission regarding potential continuous disclosure proceedings in relation to Lombard Group,” Mr Miller said.

“Insured Group in its current form has had nothing to do with the 2008 business position of Lombard Finance or Lombard Group.”

He says the residual assets of Lombard were excluded from the takeover and were transferred to a newly formed company, First One Holdings.

“This is owned by the original Lombard Group shareholders in the same proportion as their then-shareholding in Lombard Group.”

A search of the NZ Companies Office register by insuranceNEWS.com.au has revealed all of First One’s 23,406,436 shares are owned by the Insured Group.

Both companies use the same registered address in Wellington and the sole director of First One is Michael Reeves, who is also a director of the Insured Group.

Mr Reeves is also a director of a number of companies that hold shares in Insured Group. These are Athena Securities, which holds 14,280,000 shares, Lombard Group Management (720,000 shares) and Solomon Capital (222,085 shares). These companies own more than half of Insured Group’s total number of shares.

Mr Miller says the company will seek legal advice once it receives the full papers from the NZ Securities Commission.

“Insured Group understands that the Securities Commission is seeking, among other things, orders that it pays the Crown a pecuniary penalty – which due to the change in the relevant statutory provisions during the relevant period is expressed to an amount of up to a maximum of $NZ1.3 million ($1 million),” he said.

Securities Commission Director Investigations and Litigation Sue Brown says charges being laid against four directors of Lombard Finance demonstrate that market disclosure is important.

“Compliance by listed companies with their continuous disclosure obligations is vital to the integrity of the capital markets,” she said.

“The commission therefore considered this case warranted the current proceedings.”