ASIC last month announced it would review the regulation of the wider Australian unlisted debenture sector following the collapse of Banksia Securities.

Mr King said Southern Finance would have worked towards meeting whatever new requirements ASIC might have imposed.

Following Banksia's collapse, Southern attracted media attention last month about its low equity ratio, which measures the proportion of the total assets financed by stockholders and not creditors.

The equity ratio provides a buffer in the event of financial difficulties.

Southern's 2012-13 prospectus said the company's equity ratio, as at March 31 this year, was 1.99 per cent well below the 20 per cent benchmark recommended by ASIC when more than 10 per cent of the funds from debenture products were invested in property development.

The equity ratio is only a recommendation and not mandatory.

Mr King last month acknowledged the Banksia crisis had forced Southern to look more closely at its business.

He said Southern was fully compliant with all business regulations. Its low equity ratio had not put the company in difficulty, he said.

However, the increasing number of withdrawals following Banksia's collapse led it to act in the best interests of investors and offer the company for sale.

"I believe this is a good business in the wrong place at the wrong time," Mr King said.

Banksia's collapse made it clearly obvious to south-west investors that non-bank debenture issuers were not guaranteed like investments in banks and credit unions.

Southern Finance has been operating for 22 years and offers investments through debentures and secured mortgage loans, while its guaranteeing subsidiary, Southern Leasing, provides equipment finance.

Southern's mortgage loans were primarily on rural properties nearly 60 per cent with property development comprising about 17 per cent and residential properties about 12 per cent.

Southern is mainly owned by the five board members, including a partner in the Warrnambool-based Taits Legal firm, James Tait, and a consultant with and the Hamilton-based Hunter Newns legal firm, Geoffrey Simpson.

Other board members are board chairman Neville Smith, general manager Mr King and Hugh Macdonald, who is also the chief executive officer of Southern Leasing.

The company has 37 staff across six branches at Warrnambool, Hamilton, Casterton, Ballarat, Geelong and Mount Gambier.

The solid and historic building that houses Southern Finance in Kepler Street has been lending money to south-west borrowers since the late 1890s.

Southern's creation was the result of the ongoing combination of the mortgage practices of a number of south-west legal firms. Among the moves that created the modern-day Southern Finance was the combination of the mortgage practices of the Mackay Taylor legal firm, which had a long association with Southern's Kepler Street offices, with Taits in 1998.

Southern's board chairman Neville Smith was the principal of Mackay Taylor. Hunter Newns brought in its mortgage practice about 2004.

Ashley King, who has been Southern's general manager since its formation in 1990, was Mackay Taylor's mortgage manager, starting with the firm in 1978.

ehimmelreich@fairfaxmedia.com.au