Financial Markets Authority warns Du Val against misleading, misleading statements

Kenyon Clarke, CEO of real estate company Du Val Group, and his wife Charlotte. photo / delivered

Te Mana Tātai Hokohoko The Financial Markets Authority has warned residential developer Du Val Capital of making misleading and misleading statements to investors in a mortgage fund.

Du Val, which is run by Kenyon and Charlotte Clarke, may have broken the law by engaging in misleading or deceptive conduct towards investors in the Du Val Mortgage Fund.

“The FMA believes that investors have been given a misleading impression as to the reasons why Du Val Capital Partners suspended cash distributions for the fund and instead proposed cash distributions to be converted into fund shares pending a possible public listing. The FMA believes investors may also have been misled about their rights related to the suspension,” it said in a statement today.

Paul Gregory, Executive Director of Response and Enforcement, said: “Investors in Du Val’s mortgage funds did not have the information needed to make informed decisions to accept or reject the proposal. In particular, investors were misled as to why Du Val suspended the prominently advertised cash distributions because Du Val’s board of directors could not approve a cash distribution, leaving the fund unable to meet its other commitments. And that the proposal to convert cash distributions into fund shares is not permitted under the terms of the limited partnership agreement governing the investment and therefore investors are under no obligation to accept this decision.”

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The alert is intended for communication in December, when DVCP and Du Val Group contacted investors and told them about plans to restructure the Du Val Mortgage Fund.

Paul Gregory from the Financial Markets Authority. Photo / Included

This would be dissolved and the investors’ shares in the fund would be converted into shares in a new Du Val company. The Du Val Group would then potentially seek to list this new company on the NZX or another stock exchange.

Investors were then told in January that the board had decided to suspend all cash distributions from shares.

The board said its decision was made in the light of the proposed restructuring, but gave no further explanation as to the reason for the suspension. Investors have also been informed that cash distributions will be immediately capitalized and added to investors’ holdings up until the date the shares are converted into shares in the new Du Val entity.

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The FMA believes that these statements constitute misleading or deceptive conduct, or conduct that is likely to be misleading or deceptive, because investors are unaware of the reason for the Board of Directors’ decision to suspend and capitalize distributions or their related rights have been informed of the suspension.

The agency said the company should receive a formal warning and that it is in the interest of fair and transparent financial markets to publish the warning.

“The warning means Du Val investors have more accurate information in the public records of the proposal, which means they can better engage with Du Val and/or seek advice on their options if they choose to do so,” said Gregory.

“Du Val should now consider its fair trade commitments and whether it has provided accurate information to its investors. On the part of the FMA, we reserve the right to take further steps in this matter.”

Du Val issued a reply.

“Du Val Capital Partners is disappointed that the FMA has issued a public warning against the company for communicating directly with a small group of investors. The fund is closed and the announcements are of no relevance to the New Zealand public. Investors have received additional communications to clarify statements that may have been misunderstood,” it said.