Tuesday 11 October 2016 08:34 AM
Professional service firms gain $475k of $18 million Hanover Finance settlement
By Fiona Rotherham
Oct. 11 (BusinessDesk) - Professional service fees of $475,000, the bulk of which went to Deloitte, has been paid out to
help distribute the $18 million settlement reached last year between the Financial Markets Authority and directors and
promoters of Hanover Finance and their insurers.
Of the 16,500 investors in Hanover Finance, Hanover Capital, and United Finance, 5,500 investments made between Dec. 7,
2007 and July 23, 2008 were eligible for a payout. The settlement followed the FMA filing civil proceedings in 2012
against six directors and promoters of the group seeking $35 million in compensation. At the time FMA chief executive
Rob Everett said the settlement provided a better and earlier outcome for investors than going to court.
The FMA hired Deloitte to work out the distributions and make allocations on a pro rata basis.
The FMA’s annual report out yesterday said the balance of the settlement money held in a trust account was $5.1 million
including interest earned of $328,000. Four separate distributions have been made to eligible investors totalling $12.8
million while $475,000 in professional service fees to four suppliers were paid during the year from the settlement
proceeds.
The regulator said the professional fees reflect the work was complex and time-consuming due to the poor quality of data
available as to who had invested in the relevant class of securities and difficulties in tracing those investors, which
is still on-going.
Financial accounts for the authority for the year ended June 30, 2016 show Deloitte was separately paid $559,000, up
from $268,000 in 2015, for enforcement/forensic services, disbursement recovery and business consultancy. The FMA said
Deloitte had undertaken other significant one-off work during the financial year such as the Efficiency & Effectiveness review. The Chartered Accountants Australia and New Zealand was paid $276,000, down from $395,000 the
prior year, for auditor quality reviews, training and annual membership fees.
The accounts also show executive remuneration for the FMA rose to $2.6 million from $2.2 million in 2015, while wages
increased to $17.2 million from $15 million which the FMA put down to a budgeted increase in staff numbers due to the
Financial Markets Conduct Act implementation. The number of staff earning over $100,000 increased to 77 from 55 the
prior year which the regulator said reflected increased staff numbers, converting some contractor roles into permanent
ones, and that much of the hiring was from the financial services and legal/accountancy sectors where there is a tight
market for qualified staff.
Everett, the highest paid staffer earning between $540,001 to $550,000, went up a band from last year’s $530,001 to
$540,000.
The FMA reported an operating loss of $4 million for the June year against a budgeted loss of $4.4 million and compared
to a $2.5 million deficit the prior year. It had accumulated funds of $12.1 million compared to $16.1 million in 2015.
It has had the same government funding since inception in 2011 and a funding review process is underway. For the past
few financial years, the FMA has used its accumulated reserves to help fund its activities but those are due to be
exhausted by July next year.
A consultation paper released in July said the government preferred extra funding to come from the existing FMA levy on
financial market participants and suggested raising the percentage of its annual budget covered by the levy from 60
percent to 70 percent. Its current budget is just under $30 million and its preferred option is to lift that to $38.6
million annually. Its Australian counterpart, the Australian Securities & Investment Commission, has a A$127 million annual budget.
(BusinessDesk)
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