New Zealand: Court of Appeal upholds conviction for untrue statements in prospectus

The Court of Appeal gave judgment last week in Jeffries v R [2013] NZCA 188: see here (pdf). The court unanimously rejected an appeal by four former directors against their conviction for making untrue statements in an amended prospectus within section 58 of the Securities Act 1978. Indeed, the court held that the non-custodial sentences originally imposed on the directors were manifestly inadequate and failed to give sufficient weight to the serious consequences to those who invested in reliance on the statements. Custodial sentences, the court held, should have been the starting point.

The court also considered the directors' concern that including more material in the amended prospectus might have resulted in the premature demise of the company. It held that the Securities Act 1978 disclosure obligations took precedence over the directors' duty to act in the best interests of the company where there was a conflict between them (see paras. [172] and [173]). A summary of the decision is available here (pdf).