Culprits 'will be punished'

Jane Diplock

The directors of failed finance companies who failed to prevent management from indulging in risky business practices and did not alert trustees to problems will be "brought to book", Securities Commission chairman Jane Diplock promises.

Investors though, will probably rue the fact that the commission's fiercest powers are only exercised once companies have failed and their money is gone.

Diplock said the commission was restricted to taking action only when a company's disclosures proved to be misleading.

"Quite often with a finance company ... you can't see it's misleading until you see what they do."

The commission has gained some additional ammunition to use against directors.

In 2007, it gained the ability to take civil action against company directors where it believed their prospectus offer documents or advertising were misleading or deceptive.

If successful, fines of up to $1 million can be imposed.

The commission was last year also given the go-ahead to use its litigation fund to pay for criminal prosecutions against finance companies that had misled investors.