FMA 'completely satisfied' General Equity warning was appropriate and based on 'clear evidence of misconduct'

By Gareth Vaughan

A Financial Markets Authority spokesman says the regulator is "completely satisfied" its recent warning about General Equity was both appropriate, and based on "clear evidence" of misconduct by the building society.

The FMA spokesman's comments to interest.co.nz follow our previous story reporting General Equity's apparent "surprise" at the FMA's September warning, which General Equity, formerly known as General Equity Building Society, must run on its own website. General Equity is registered in New Zealand but has operated overseas.

“The FMA is completely satisfied that the warning regarding General Equity was appropriate and was based on clear evidence of misconduct by General Equity," the FMA spokesman said.

"For the avoidance of doubt, we confirm our view that General Equity has engaged in misleading and deceptive conduct, including the way it has represented how it is regulated in New Zealand and in relation to the Asset Builder Fund. We remain concerned about the conduct of General Equity, since General Equity has failed to file its financial statements for the year ended 31 March 2014 by 14 August 2014, as required by law.”

In September the FMA said the New Zealand public should be extremely cautious if dealing with General Equity.

"Although General Equity is registered as a building society, it does not carry on business as a deposit taker in NZ, and is not subject to Reserve Bank or trustee oversight. General Equity has not issued shares to the public. Most of General Equity’s business is conducted off-shore. The FMA is not aware that any New Zealanders have suffered a loss at this time. However, given General Equity’s past conduct, we consider that anyone dealing with General Equity should exercise extreme caution," the FMA said in its warning.

The warning came after General Equity featured in several interest.co.nz stories. One story, from August last year, was based on an interview with Mark Bayoud, General Equity's director of international business, and Murray Greer, its chairman. Among things to come out of the interview was Bayoud's claim General Equity was "comprehensively" regulated by the FMA, something the FMA refuted at the time.

As reported previously, General Equity maintains its directors and senior managers were surprised that after extensive correspondence with the FMA over concerns "overwhelmingly relating to past events and the activities of other entities or persons," the FMA issued a warning and ordered General Equity to publish it.

"The powers of the FMA are new and largely untested. General Equity is reviewing its legal options and has engaged legal advisers who are in communication with the FMA. The only avenue for response is by way of legal review which is costly and lengthy," General Equity says. The building society also says it's in the process of being taken over by "successful Malaysian registered fund" IBB, with contracts signed just over a week after the FMA warning was issued.

See all our stories on General Equity here.

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