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Enforceable undertakings
The Commission accepted enforceable undertakings from
Huka Falls Resort Limited and Kensington Park Properties Limited
on 5 March 2007. Both companies were developing properties with
common facilities for residents.
Each development has set up an
incorporated society:
- to make and enforce bylaws of the development; and
- to own and manage the facilities.
These companies offered
membership in the incorporated
societies to prospective buyers of the
properties. These memberships were
participatory securities under the
Securities Act 1978.
The offers of securities were made
without an investment statement
or registered prospectus, in breach
of the Act. The companies were
unaware that the offers breached the
law.
The companies and their directors
have accepted that the offers
were unlawful and have given
undertakings which include that:
- any future offers of securities to the public will be made in accordance with the provisions of the Securities Act 1978 and Securities Regulations 1983, subject to the terms and conditions of an exemption granted by the Commission;
- procedures will be put in place so that advertisements for offers of securities to the public comply
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- with the law;
- investors who subscribed for securities will have the opportunity to either:
- cancel their subscription and receive a refund within 15 working days of the closing date of the offer; or
- re-subscribe for their securities under the terms and conditions of an exemption granted by the Commission.
"Failure to comply with securities
laws carries serious consequences.
Issuers and their directors may be
required to repay the subscription
amounts with interest, and may face
civil or criminal penalties,"
says General Counsel Liam Mason.
"Residential property developers
should seek advice from a lawyer
who is experienced in securities
law. Developers may be able to
rely on class exemptions to reduce
compliance costs. Alternatively,
they may seek an individual
exemption from the Commission.
These are considered on a case by
case basis."
The signed undertakings are on
www.seccom.govt.nz. |
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Prospectus banned
The Securities Commission has
cancelled the prospectus of finance
company Classic Capital Limited.
The prospectus was banned because it
omitted material information.
Classic Capital Limited’s sole director,
Mr Keith McCoy is bankrupt, banned
from management, and facing charges
of forgery and dishonestly using his
position as a company officer, all in
Australia. The prospectus did not state
these facts.
"A prospectus must contain all
material information about an offer
of securities," says Kathryn Rogers,
Director of Primary Markets at the
Securities Commission.
"Mr McCoy’s bankruptcy and
management ban relate directly to his
competence to handle investors’ money
and to run a finance company. The
fact that he is facing criminal charges,
although these have not yet been heard,
would also be likely to infl uence people
deciding whether or not to invest."
Mr McCoy told the Commission that
he is appealing the management ban
and that the criminal case has not
yet been decided. He agreed that the
prospectus should be cancelled.
Classic Capital had been seeking to
raise $15 million by issuing secured
debenture stock. The Commission
understands that no money had been
invested.
The Australian Securities and
Investments Commission assisted the
Commission in this matter. |
New law that places disclosure obligations on
people who give investment advice as part of
their job will come into force this year. There
are also law changes relating to insider trading
and substantial security holder disclosure and
new law on market manipulation.
