New Zealand’s Financial Markets Authority (FMA) announced today it has started legal action against failed insurer CBL Corporation and its former directors for alleged corporate misconduct.

The two separate civil proceedings filed in the Auckland High Court relate to breaches of the Financial Markets Conduct Act by the company and senior executives who were running the business from 2015, when it became publicly listed, to 2017.

FMA says it is pursuing the course of action after a “significant and complex investigation” into the failure of CBL, which was placed into liquidation last May.

“We have identified a number of areas of potential misconduct by CBL and its directors and considered a range of potential enforcement actions against the backdrop of our regulatory objectives,” General Counsel Nick Kynoch said.

“We are also mindful of bringing an appropriately targeted and manageable case. The proceedings filed today address these objectives.”

In the first civil proceeding, CBL is accused of failing to disclose related party transactions as part of its initial public offering in September 2015. The business is also alleged to have provided false and misleading statements about its solvency ratios and use of the funds raised from the offering.

Former MD Peter Harris, director Alistair Hutchison and CFO Carden Mulholland are the other defendants named in the proceeding.

The trio are also named as defendants in the second civil action, along with former chairman John Wells. They are alleged to have engaged in misleading and deceptive conduct in respect of market announcements made by CBL on August 2017. The proceeding also accuses them of failing to comply with their disclosure obligations.

FMA says both proceedings are seeking declarations of contravention and civil pecuniary penalties. If successful, individual claimants can seek compensation.

Two separate shareholder class actions backed by litigation funders have already been filed respectively against CBL and its former directors.

Mr Kynoch says the FMA will engage with investors and the courts to manage the various proceedings that have been launched.

“Investors exercising their own legal rights and pursuing privately funded litigation plays an important part in a well-functioning market, which the FMA strongly supports,” Mr Kynoch said.

“However private civil litigation may not always address areas of broader public interest that are of concern to the FMA.”