Former CBL Group CFO Ordered to Pay Over $1.2 Million for Disclosure Breaches

Carden Mulholland, the former Chief Financial Officer (CFO) of CBL Group, has been ordered by the High Court to pay a pecuniary penalty of $641,250 and agreed costs of $606,216.53. This decision follows proceedings brought by the Financial Markets Authority (FMA) - Te Mana Tatai Hokohoko, which alleged breaches of continuous disclosure requirements under the Financial Markets Conduct Act 2013 (FMCA).

The contraventions occurred over a five-month period leading up to CBL Corporation Limited's (CBLC) collapse in February 2018. Justice Gault's penalty decision comes after a nearly six-week trial in the Auckland High Court, which concluded in early August 2024. The FMA's case centered on Mr. Mulholland's role as CFO of the CBL Group 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 Mr. Mulholland personally liable as an accessory for three of CBLC's continuous disclosure contraventions. These related to: approximately $35 million in aged receivables impacting regulatory solvency, known by August 24, 2017, but not disclosed until February 5, 2018; the need for CBLI to strengthen its reserves by approximately $100 million, known by January 25, 2018, but disclosed on February 5, 2018; and a Central Bank of Ireland directive for CBLIE to hold additional cash reserves of €31.5 million, known by January 30, 2018, but disclosed on February 7, 2018.

After the liability finding, the FMA and Mr. Mulholland reached an agreement on the recommended penalty. Justice Gault stated in his decision, "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... The impact on the market was serious and far-reaching." Margot Gatland, FMA Head of Enforcement, welcomed the decision, noting it sets "an important precedent for holding a CFO accountable for an entity's continuous disclosure breaches," and that 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."

(Note: $ refers to New Zealand dollars)