Broker warns regulators had better be right over Hubbard
Heads should roll at the Securities Commission if the severity of its action relating to South Canterbury Finance founder Allan Hubbard proves to be unwarranted, says John Kidd, the head of research at broking firm McDouall Stuart.
Thursday, June 24th 2010, 4:13PM 
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"If investigations identify little more than oversight or laxness by Hubbard, the Commission will face intense pressure to justify the severity of its recommended course of action," said Kidd in a note to clients that lamented the impact of losing the Hubbard empire's activities as an active investor in both NZX-listed stocks and the rural economy.
"Equity capital access for New Zealand companies will inevitably suffer from this action," said Kidd, who feared the impact on the economic recovery if a loss of confidence in South Canterbury Finance - not part of the statutory management but in the throes of debt restructuring - were to cause its collapse.
The "intense rumour, speculation and uncertainty" that would ensue until the statutory management announced on Sunday was resolved was also "precisely what the market - and particularly the finance company sector - does not need right now as it struggles to recover."
"Along with the direct cost of appointing statutory managers, valuable Securities Commission, Companies Office and Serious Fraud Office resources will now be tied up for the next few weeks and months seeking to unearth evidence of criminal intent.
"If it all comes to little or nothing, the Securities Commission will need to take a long, hard look at itself and ask how it justified the mobilisation of so much resource for so little reward when there remain numerous directors and executives of failed companies that are far more deserving of timely investigation and justice," Kidd said.
"If Hubbard's actions are revealed as criminal and/or deceitful, many, many people (including us) will be shocked," he said. "If the Securities Commission has got it wrong and regulatory over-reaction is instead revealed, such will be the extent of unjustified, negative market impact that swords should be fallen upon."
Hubbard's primary investment vehicle, Hubbard Churcher Trust Management, is "a very significant and active participant in the local equity markets with holdings in at least 75 of the 150 companies listed on the NZX."
The firm had also been a "strong and consistent supporter of local early-stage companies - a layer of the local capital markets that is desperately thin."
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Comments from our readers
Yet if you don't take responsibility for your actions, tie it all up in trusts and still live a millionaire's lifestyle, you get away with it. Where is the natural justice in this?
NO CONFLICT OF INTEREST
An article in Fairfax Media publications this morning wrongly reports that Simon Botherway has declared a "potential conflict of interest" in relation to Mr Allan Hubbard.
Mr Botherway has declared to the Commission that he may have a potential interest in matters relating directly to South Canterbury Finance Limited because of previous business dealings between his brother and that company. The statutory management order does not apply to South Canterbury Finance Limited.
On this basis, the Commission is satisfied that Mr Botherway does not have a conflict of interest in relation to Aorangi Securities Limited, Mr or Mrs Hubbard, or the charitable trusts that were the subject of the Commission's recommendation for statutory management.
Commenting is closed
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It is amazing the vengence demonstrated towards Hubbard.
Clearly this has political motivations behind it. What does Key, English and Co. gain by this?
How did Hanover, Strategic, Blue Chip etc all avoid this level of scrutiny when they had every financial analyst in this country loudly questioning the business models they operated?
So many questions - just wish we had journalists the level of other nations to dig into the deep issues this action raises.