KEY POINTS:
The ninth and latest finance company collapse, that of Finance and Investments yesterday, has alarm bells ringing at the Securities Commission as the $16 million business had operated for more than 30 years without the regulator knowing it existed.
Finance and Investments, which is unrelated to an Eric Watson and Mark Hotchin-controlled company with a similar name, owes $16 million to 370 investors including $1.25 million to Nelson-based LDC Finance, which was placed in receivership on Tuesday owing 100 investors $19.3 million.
Finance and Investments was structured as a partnership between Andrew Harding and Murray Scholfield, LDC's majority owners.
It began financing vehicles in 1973 and most investors were Harding and Scholfield's friends and relations.
While Finance and Investments' business was much like that of a finance company - it was principally a provider of hire purchase and vehicle finance - it did not have a prospectus and yesterday it was unclear whether it had issued any form of securities such as debentures or notes.
LDC's receivers, Malcolm Hollis and John Fisk of PricewaterhouseCoopers, were yesterday also appointed to Finance and Investments. Fisk said as a result of LDC's failure Finance and Investments could not obtain the funding it needed to meet its obligations or continue to trade.
Although he did not yet know the value of the business' assets, Fisk said it was likely to be less than what the investors were owed, possibly by as much as 50 per cent.
A spokeswoman for the Securities Commission confirmed the regulator was talking to Hollis and Fisk about Finance and Investments, a business the commission was previously unaware of.
"It didn't have a prospectus so obviously we wouldn't know whether it was in operation or not."
She also said it was possible there were other finance businesses similarly operating on an unregulated basis below the commission's radar.
Kapiti Coast financial adviser Chris Lee said Finance and Investment's failure raised further questions about information from LDC's directors last week to the commission saying their prospectus accurately reflected the company's affairs.
Finance and Investments' $1.25 million loan from LDC is not detailed as a related party transaction in LDC's most recent prospectus and is not readily identifiable anywhere else in the document.
"You don't go into receivership now if you didn't know something was haywire a week ago," Lee said.
"I would say the directors of LDC at least will have to demonstrate they signed that letter in complete blissful ignorance of what was about to occur."
Meanwhile, the commission yesterday said new powers for finance company trustees had been formulated in recent discussions with trustee companies.
"It is important that trustees have up-to-date and reliable information about the companies they supervise," said acting commission acting chairman Colin Beyer.
"The changes we are proposing will ensure that all trust deeds provide trustees with robust powers to get the information they need to carry out their duties in the interests of investors."
Its recommendations will be made to the Commerce Minister this month.
Ninth failure
* Finance and Investments owes $16 million to 370 investors.
* Investors include LDC Finance, which went into receivership on Tuesday.
* The Securities Commission did not know of Finance and Investments' existence
