Had the Financial Markets Conduct Bill been in effect, the four Lombard Finance directors may have avoided guilty verdicts.
This is because the Bill reserves criminal sanctions for misconduct which is deliberate and reckless – Justice Dobson’s decision is clear that the charges proven are “a material step away from the seriousness required for a custodial sentence” and that he will be looking at community based sentencing and a financial penalty only.
This is similar to the Centro case concluded in the Australian Federal Court last year where the Judge also accepted that, although there had been a failure to disclose material information, there had been no intention deliberately to mislead the market.
The important difference between the two cases is that the Centro case was a civil proceeding only. Hence the Centro directors were never at risk of a criminal conviction and the Judge was able to issue declarations of contravention with no further penalty.
Of course directors must be held accountable for their decisions. But the Lombard judgment is one of a series in recent times which have underlined the risks associated with being a director and there is a concern that good people may be discouraged from taking up directorships or that boards will become too risk averse to pursue growth opportunities. We have reservations about the burdens recent court decisions are imposing on honest well intentioned directors.
It is to be hoped that the passage of the FMC Bill will go some way to reducing these concerns while maintaining appropriate accountability.
Roger Wallis spoke to Radio NZ National on Friday 24 February. Listen to his comments here