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The Financial Markets Authority says the property investment firm Du Val Capital Partners (DVCP) may have misled or deceived investors in its mortgage fund.
The FMA said information provided to investors in December 2022, about Du Val's plan to restructure the mortgage fund, were misleading.
The firm proposed to wind-up the fund and convert investors' units into shares in a new Du Val company.
"Investors in Du Val's mortgage fund have not had the information necessary to make properly informed decisions to accept or reject the proposal," FMA executive director Paul Gregory said.
"The proposal to convert cash distributions into units in the fund is not permitted under the terms of the limited partnership agreement governing the investment, and investors are therefore not obliged to accept that decision."
DVCP advised investors in January its board had resolved to suspend all cash distributions on their units, but didn't provide any further information about the reason for the suspension, along with how investors' money would be treated.
DVCP's board said in a statement it was disappointed the FMA has issued a public warning against the company for direct communication made to a small group of investors.
It said the fund had been closed, and the communications had no relevance to the New Zealand public.
"Investors have received further communication to clarify statements that may have been misunderstood," the board said.
Gregory said it was important to issue DVCP with a formal warning about the conduct.
"The FMA is satisfied that making those statements may have constituted misleading or deceptive conduct, or conduct that is likely to mislead or deceive, because investors were not informed of the underlying reason for the board's resolution to suspend and capitalise distributions, or of their rights relating to the suspension.
"The warning means Du Val investors have more accurate information on the public record about the proposal which, if they wish, means they can better engage with Du Val and/or seek advice about their options.
"Du Val should now reflect on its fair dealing obligations and whether it has provided accurate information to its investors.
"For the FMA's part, we reserve the right to take further action in the matter."
