The receivers of Capital + Merchant Finance are suing Perpetual Trust, as the company’s former trustee, over its failed supervision of the failed finance company, which collapsed in 2007.

They say it’s probably the only way that they will get any money back for the 7500 investors who are owed about $167 million. The company has no other assets with realisable value.

Perpetual was also the trustee for a number of other failed finance companies.

PricewaterhouseCoopers is suing BDO over its audit work on Strategic Finance. PwC is also being sued for its audit of one of bankrupt developer David Henderson’s businesses.

Adviser Chris Lee said the cases could open the door for more action against those involved with oversight of other finance companies.

He said it was unbelievable that five years on, investors had still not been able to benefit from the insurance cover held by trustees and auditors of the firms.

He said many receivers also acted as auditors, so there was a conflict of interest that was hurting investors.

“The conflict of interest with receivers who are also auditors is obvious. Trustees have said they will attach any auditors to any case against them so the same conflict is apparent to them. The conflict of interest is denying investors a fair opportunity to access an obvious source of compensation - billions of dollars of insurance cover.”

It should have been clear to auditors that something was amiss, he said. “A goat with no nose could be overcome by the fumes from the likes of Bridgecorp, Lombard, Nathans, CMF, MFS and so the lack of action against auditors is simply not credible, infers influenced by conflict of interest.”

An FMA spokeswoman said the conduct of trustees and auditors of the finance companies had been examined by the regulator and receivers.

“FMA has an ongoing supervisory role with respect to the conduct of trustees and auditors. It regards the gatekeeper roles performed by trustees  and auditors as being critical to the effective functioning of financial markets, and to investor confidence in these markets.”

She said, where there was evidence that trustees and auditors had breached their obligations, and where it was in the public interest to take action, the FMA would do so.

“These public interest considerations include looking at the nature of the breaches and the harm to investors and the market; the likelihood of recovery, and whether another party (such as a receiver or liquidator) may in a better position to take action,” she said.

“FMA has a wide range of regulatory tools that it can use when dealing with trustees and auditors.  FMA also works closely with frontline regulators such as NZICA in this space. FMA’s regulatory tools include issuing warnings, seeking undertakings and working with the participant to right a wrong, as well as taking formal court action where appropriate.”