6 Jul 2015

Hanover investors to get $18m in settlement

9:19 pm on 6 July 2015

Investors who lost money in the failed Hanover Finance group will receive $18 million in an out-of-court settlement between the Financial Markets Authority and the former directors.

The funds will be distributed to people who invested in the Hanover Finance companies from 7 December 2007 to 23 July 2008 and covers about 5500 investments.

About 16,000 investors lost $550 million when the company collapsed.

The Financial Markets Authority filed civil proceedings in 2012 against six directors and promoters of the group, which included Hanover Finance, Hanover Capital and United Finance, seeking $35 million in compensation.

It said claims made in fundraising documents and advertisements between 2007 and 2008 were misleading and untrue.

But the former directors have denied any wrongdoing.

Financial Markets Authority chief executive Rob Everett said the settlement provided a better and earlier outcome for investors than going to court.

"Our view was that it was distinctly possible we would have got less than $18 million," he said.

"I would add to that, that even if that judgment were passed, several of the defendants - as far as we could tell - would have depleted what little resources they had to put on the table now.

"In fact, a judgment might well have put them into bankruptcy but it certainly wouldn't have secured compensation for investors."

Four of the directors - Bruce Gordon, Mark Hotchin, Gregory Muir and Tipene O'Regan - said in a statement that Hanover had excellent reporting systems and, at the time, directors believed on reasonable grounds that the statements in the prospectuses were true.

They said they settled because of the cost and time involved in going to court, and because insurers and a former insurance broker made it possible to provide a payment to investors.

They said they regretted the loss of investors' money but said Hanover stopped business because of the effects of the global financial crisis, not because of mismanagement.

As part of the settlement, the directors have given undertakings not to act as directors of a bank or non-bank deposit-taker for at least three years.