Investment fund’s ‘50% return’ misleading says FMA
The Financial Markets Authority issued a stop order yesterday against an Auckland property investment firm making claims it said were likely to ‘‘mislead or confuse prospective investors’’.
The One Management GP promoted an investment opportunity in a residential housing development it said would give investors a ‘‘50% fixed return’’ with minimal risk.
FMA acting director of capital markets Paul Gregory said while the offer was only available to wholesale investors, this did not make misleading statements acceptable. ‘‘This offer’s disclosure has fallen well short on the basics of what helps investors to make investment decisions: Level of risk and returns payable.’’
Wholesale investors are people or organisations who do not require disclosure because they have sufficient previous investing experience. They have fewer protections than retail investors.
Gregory said the stop order was issued to protect investors from harm.
The guarantee given to investors by One Management company director Tung Wei Ling and Manna Wang provided no protection to investors in the event of default by the fund, the FMA said.
There were also references to a mortgage over the land securing advances by the fund. But the FMA discovered these would not be in place at the time of initial drawdowns under the loan agreement, likely misleading investors as to the levels of risk.
The offer gave the impression that investors were guaranteed from Ling and Wang’s personal assets. However, the FMA discovered these assets were not at risk under the guarantee, undermining its benefit to investors.
Promotional materials for the fund clearly stated investors would receive a ‘‘50% fixed return’’ over three years. But it was in fact offering 16.7% per annum, or 14.5% per annum on a compounding basis. ‘‘These percentages differ considerably from 50% per annum,’’ the FMA said.
The stop order indefinitely prohibits The One Management GP from distributing any promotional materials related to the fund.
It is also prohibited from issuing or selling any units in the fund, or accepting further contributions for a further two months.