Freezing orders over Mark Hotchin's assets, which have been in limbo since 2010, will be lifted.

An $18 million Hanover Finance settlement has been described as a "soft deal", with the failed finance firm's directors continuing to deny liability.

However, the Financial Markets Authority (FMA) says it made the best possible decision for investors, who could have ended up with nothing.

The FMA filed its civil lawsuit against the directors and promoters of Hanover and its related companies in 2012.

The markets watchdog said in a statement it has ultimately settled out of court for $18 million - half the $35m sum it was originally seeking.

The FMA said the defendants denied liability and disputed its claims.

The decision means claims that the company's directors and promoters misled investors will not be tested in court.

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Hanover directors Bruce Gordon, Mark Hotchin, Gregory Muir and Tipene O'Regan remained unrepentant.

"All directors at all times believed on reasonable grounds that the statements in the prospectuses were true," they said in a written statement.

Hanover had failed in 2008 because of the global financial crisis, not mismanagement, and "we do not believe the FMA would have succeeded at trial," the directors said.

The directors said they settled to avoid the legal action dragging on and because insurers were able to provide the payment.

The FMA said that as part of the settlement, the four have agreed not to act as directors of a bank or non-bank deposit-taker for three years.

It also said Eric Watson and Dennis Broit, who were also named in the lawsuit, gave the FMA assurances they would not do so either at any point.

Bruce Sheppard, who was on the board that originally set up the FMA, described the agreement as a "pretty soft deal".

He said he would have pushed for more, with a fallback option being a multi-year ban on directing any company.

Sheppard said the $18m settlement could be seen as a good result, but the FMA had broader regulatory duties.

It had clearly taken a pragmatic approach, especially given some elderly investors would not be around if a trial dragged on for another two or three years.

"I understand that," said Sheppard. "What I don't understand is the softness of the regulatory pushback."

The settlement cash will be divided between eligible investors who put money into the companies between December 7, 2007 and July 23, 2008.

About 5500 investors will recover roughly 5c to 20c in every dollar, depending on which vehicle they invested their money.

Aucklander Tom Brosnahan, who invested a "substantial amount" into Hanover, missed out on the settlement.

However, he had received a letter with claims similar to those that later appeared in the prospectus.

"It sounded extremely plausible, and for that reason I turned over my investment," he said. "Six months later, it blew up."

FMA boss Rob Everett defended the decision to settle.

"We genuinely believe that if we'd gone to trial, the money on the table now would be seriously diminished, or possibly in some cases gone altogether," he said.

Everett pointed to the costs of a long trial, possible appeals, and the uncertainty of victory.

He said the FMA had to make a trade-off between seeking liability and getting a result, with compensation the number one priority.

Belinda Moffat, the FMA's enforcement director, acknowledged investors would have a mixed range of feelings.

"We've had a lot of contact with investors over the course of the investigation," she said.

"What we know that investors want is certainty now."

Moffat said the taxpayer-funded watchdog had spent $3.5m and 10,000 hours of staff time on the case.

Prime Minister John Key said the settlement would be some comfort to Hanover investors, and he could not critique the decision as the regulator had information which would allow it to calculate its chance of winning in court.

"I think it's just reflects the practicalities of what's available to them," Key said, adding that the FMA had much greater powers than its predecessor, the Securities Commission.

"We're a much better regulator now, I think that's a big difference. Those finance companies essentially sat outside the level of regulation that they currently have, and that would at least help," Key said.

"But is there risk? There's just always risk...[If] a financial institution offers much higher rates than other people, other financial institutions, people just don't understand the level of risk they're taking."

The FMA lawsuit only related to one particular subset of investors and issues within the failed finance company.

Hanover froze half a billion dollars of investor funds in July 2008 after running into financial difficulties.

Investors eventually voted to accepting a debt-for-equity deal with Allied Farmers, which turned sour as the company's asset value plummeted.

The Serious Fraud Office conducted a 32-month investigation, but did not lay any criminal charges.