Former CBL Group CFO Ordered To Pay Penalty And Costs For Continuous Disclosure Breaches
CBL Corporation Limited (CBLC) publicly listed in October 2015, and the contraventions occurred over a five-month period in the lead up to its subsequent collapse in February 2018. The High Court's penalty decision follows a nearly six-week trial in the Auckland High Court before Justice Gault, which commenced in late June 2024 and concluded in early August 2024.
The FMA's case against Mr Mulholland centred on his role as CFO of the CBL Group (for which CBLC was the parent company) and as a member of CBLC's Disclosure Committee. He was also a director of CBLC's European subsidiary, CBL Insurance Europe dac (CBLIE). The Judge found that Mr Mulholland had the required level of knowledge and participation in three of CBLC's continuous disclosure contraventions to make him personally liable as an accessory. These related to:
The existence and impact on regulatory solvency of approximately $35 million of aged receivables (insurance premiums owed to CBLI but not paid to it). This issue was known to CBLC by 24 August 2017 but not disclosed to the market until 5 February 2018.
The need for CBLI to strengthen its reserves by approximately $100 million. This was known to CBLC by 25 January 2018 but not disclosed to the market until 5 February 2018.
A direction issued to CBLIE by its prudential regulator, the Central Bank of Ireland, requiring CBLIE to hold additional cash reserves of €31.5 million. This was known to CBLC by 30 January 2018 at the latest but not disclosed to the market until 7 February 2018.
After the liability finding, the FMA and Mr Mulholland reached agreement on the recommended level of penalty that the Court has now approved. In his penalty decision Justice Gault said, 'As the FMA submitted, the lack of disclosure by CBLC meant investors were denied timely access to material information and continued to trade, uninformed, for an extended period of more than five months...I have addressed Mr Mulholland's significant involvement in these contraventions. The impact on the market was serious and far-reaching.'
In assessing the appropriate penalty, the Judge noted that 'The penalty imposed against Mr Mulholland as a senior officer with specific responsibilities in relation to disclosure needs to reflect the importance of listed companies making prompt and accurate disclosures to the market, as well as his specific involvement in the contraventions.'
FMA Head of Enforcement, Margot Gatland welcomed the Court's decision, saying the findings of liability and the subsequent pecuniary penalty imposed set an important precedent for holding a CFO accountable for an entity's continuous disclosure breaches.
'This was the first time New Zealand Courts had considered the liability of a CFO acting as an accessory to a company's contravention under the FMCA. The Court's ruling and penalty demonstrate that such behaviour is unacceptable and will not be tolerated. The FMA will continue to take action when we see this type of misconduct damaging the trust and confidence in New Zealand's financial markets and businesses.'
The FMA proceeded to trial against MrMulholland, having reached in-court settlements with CBLC, its Managing Director Peter Harris, and its four former independent non-executive directors in 2023 and 2024, which saw them each admit seven contraventions and the Court make pecuniary penalty orders totalling $11.28 million.
A related proceeding brought by the FMA alleging breaches of the FMCA in relation to CBLC's Initial Public Offering in 2015 is set down for a six-week trial commencing 13 April 2026 in the Auckland High Court.
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