New Zealand's Securities Commission banned failed finance company Propertyfinance Securities from advertising its latest moratorium restructure proposal on the grounds that the advertisements were misleading to investors. Propertyfinance carried out a series of roadshows in late March and early April advising investors about the restructure proposal and the apparent pros and cons of moratorium versus receivership options. The Securities Commission said it understood Propertyfinance had been developing a proposal to restructure its moratorium since failing to meet a scheduled payment in December 2008. The failure meant that the finance company breached its trust deed. "Its proposal involves varying the terms of the existing securities held by debenture holders, which amounts to a new offer of securities under the securities law," Securities Commission spokesman Roger Marwick said. "The Commission believes that the roadshow presentations were likely to mislead investors because they set out only the positive aspects of the restructure proposal, and only the negative aspects of the receivership option," Marwick said. "By omitting the potential disadvantages to investors of the proposal and the potential advantages of receivership they did not provide balanced information," he said. "In the Commission's view the offer does not comply with the law because there is no registered prospectus. Under the law securities can not be advertised until there is a registered prospectus, except in certain limited circumstances which do not apply in this case." "Moratorium documents are a form of offer documents and are therefore subject to the same rules as other offer documents." "Investors need to be provided with full information about both the advantages and disadvantages of moratorium and receivership options so they can make informed investment decisions," Securities Commission Chairman Jane Diplock said "Investors should be provided with full information, including the assumptions directors have made if they say a moratorium will result in better returns and the risks compared with those of receivership," Diplock said. Marwick said the Propertyfinance Securities directors told the Commission "that they had received legal advice on the presentation and believed the contents to be true and accurate, however they respect the views and findings of the Commission." The finance company had been operating under receivership between August and December 2007, and operating under moratorium since December 2007. When it failed, it had NZ$170 million worth of investor's money in about 4,000 deposits. See our Deep Freeze List here. Before failing to make the payment in December, Propertyfinance had repaid NZ$7.2 million to investors.
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