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The Securities Commission suspended the Bridgecorp prospectus three days before it went into receivership - but was unable to tell the public.
It said yesterday the Bridgecorp prospectus, from December 2006, was suspended because it had become false or misleading as Bridgecorp failed to disclose its inability to pay investors.
"In particular, they did not contain material information about the failure since June 20, 2007, of Bridgecorp to repay investors on the due date," the commission said.
The suspension meant that any money Bridgecorp raised after that point had to be held in trust. However, the commission said the receivers indicated this applied to only a small number of investors.
The regulator said it was prohibited by law from publicly disclosing a suspension until a prospectus was formally cancelled, which it did on Wednesday.
The regulator has been the target of criticism after Bridgecorp's collapse last week, with investors comparing it with the Australian Securities and Investments Commission, which suspended Bridgecorp's Australian arm from raising money last year.
The commission said it "cannot step in to stop a finance company failing, or take action against a finance company that fails, or help investors recover their money.
"The commission can intervene only if a finance company does not provide the required information for investors to make a decision on whether or not to invest."
Under laws expected to be introduced next year, the Reserve Bank will be responsible for regulating finance companies and the companies will need to be licensed.
They will also have stricter capital adequacy requirements and credit ratings from approved ratings agencies will be mandatory.
The commission said the changes were "expected to result in stronger minimum requirements for finance companies and to assist investors to make better-informed investment decisions".
However, it added: "Regulation cannot prevent company failures and should not seek to do so."
