Editorial: Hotchin an easy target for a hard law

Mark Hotchin. Photo / Richard Robinson.

There was never going to be even a smidgen of public sympathy for Mark Hotchin when the Securities Commission froze his New Zealand assets this week.

His lavish lifestyle, as encapsulated in an almost-finished 12-car garage Paritai Drive mansion, ensured as much. The former Hanover Finance boss invited only further odium when he insisted he could not live on the $1000 a week the commission has allowed him.

Times, it seems, are about to get tougher at the upmarket four-storey beachfront apartment on the Gold Coast where he is ensconced.

Yet the fact that Mr Hotchin has made himself the easiest of targets could not totally mask the magnitude and onerousness of the steps taken against him, and the manner in which they were taken.

Those unfamiliar with the 2006 Securities Amendment Act had reason to be startled. No advance warning was given to Mr Hotchin before the commission obtained an order freezing his assets after a closed hearing before Chief High Court Judge Helen Winkelmann. Now, he can do nothing with those assets at least until an appeal is heard in February.

The harshness of the exercise was amplified by the fact that it was undertaken even though the commission's investigations into Hanover have not been completed. It was not, said the market watchdog's chairwoman Jane Diplock, indicative of criminal or civil liability "or of the commission's view in that regard". It was in the public interest to request the order as a preventative measure "to preserve assets from being sold or transferred".

The commission's action was the first under the 2006 act, which was designed to strengthen the bite of a regulator once routinely described as toothless. Mr Hotchin has learned that it now has extensive powers. So much so that it is tempting to ponder what might have been the reaction had a similar approach been taken to somebody with a far higher public standing. Or, for example, Julian Assange, of WikiLeaks. Would this have prompted a controversy over the power of the state?

Mr Hotchin's lifestyle, and the plight of thousands of Hanover investors, render any such debate mute. There will be no quibbling with the commission's view that the action was necessary to ensure compensation was available to meet any civil claims that might be brought by those investors.

Likewise, there will be widespread applause for the more active approach being taken by the commission and the Serious Fraud Office, not least their willingness to make public pronouncements about their inquiries and intentions.

Both have been accused of letting investors down as a string of finance companies collapsed. Now it seems almost as though the two are competing to outdo each other in the sternness of their approach.

The commission was wont to complain that it was under-resourced and ill-served by the legislation at its disposal. This week's court order confirms, at least in terms of the law, that that is no longer the case.

Any regulator able to take such action on the basis that a company director may become liable to recompense investors at some undefined time in the future is strongly armed. So much so that one of its responsibilities is to use that power responsibly.