Tuesday 10th of August 2004

The National Enforcement Unit of the Companies Office has laid charges in the Auckland District Court against Mortgage Financier Limited (MFL), a registered contributory mortgage broker based in Whangarei, and its director, Beau Davidson. The charges are to be first called in the Auckland District Court on 2 September 2004. The charges relate to the offering and management of interests in a contributory mortgage by MFL. The interests were secured by a first mortgage over a property at 1 Parliament Street in central Auckland. MFL faces 4 charges under the Securities Act (Contributory Mortgage) Regulations 1988 relating to paying contributions out of its nominee company""'s trust account to the borrower/mortgagor when: 1 contributors had not been sent or given a valuation report that complied with the Regulations; 2 contributors had not been sent or given documents containing a statement signed by the mortgagor detailing the expected costs of the development and the source of funds to be used to service all money borrowed; 3 it knew or ought to have known that the valuation reports provided to contributors were misleading in a material particular; and 4 there were not contributions in the trust account equal to the amount of the principal sum of the mortgage. Beau Davidson is charged as a party to these breaches under s 66 of the Crimes Act 1961. If convicted, both MFL and Mr Davidson are liable for a maximum fine of $5,000 on each charge. The National Enforcement Unit also determined that charges against some other parties for the same breaches could not be pursued for legal reasons relating to the interrelationship of section 59 of the Act and the relevant provisions of the Contributory Mortgage Regulations. The other parties were Money Managers Limited (MML) and Securities Registry Limited (SRL). Manager of the National Enforcement Unit, Shane Keohane, said the Unit did not ultimately have to form a view as to whether MML was an issuer or promoter or whether SRL was a promoter. """Our decision not to prosecute should not be taken as an indication that we formed a view that these entities were not so acting in relation to these securities. Mr Keohane said his decision was based upon the legal point outlined above. The Ministry of Economic Development confirmed that it would consider these issues as part of its review of the Securities Act and Other Securities Law Issues, the fourth and final piece of the Government's four-part review of securities law. Mr Keohane said the Securities Commission has already begun a detailed review of the contributory mortgage regulations and any findings will feed into the Ministry""'s work.