Investors Entitled To Refunds: Sec Com

Commission Finds Instances Where Investors Entitled To Refunds

Securities Commission investigations into finance companies have found that many investors are entitled to refunds on their investments.

Where individuals and companies have broken the law by offering securities to the public without a registered prospectus, investors are entitled to a refund of their principal plus interest.

Investors who did not receive an investment statement before investing may also be able to seek a refund.

Investors can take action against both the issuers and the directors personally for recovery of their investment. The amount available may exceed the amounts returned on receivership or liquidation. The viability of any such action will of course depend upon the financial ability of the issuer or the directors to meet that liability.

However, investors must take action themselves. The Commission is not able to take action for them. The Commission strongly recommends that investors seek legal advice as to their entitlements, and the prospects of enforcing those entitlements.

The Securities Act requires an issuer to have registered a prospectus before securities are allotted to a member of the public in New Zealand. The issuer must also make sure that the investor has received the related investment statement before that investor subscribes to the offer. If the issuer is offering debt securities, such as debenture stock, the Securities Act also requires there to be a trustee for the investors. There are, however some instances in which the issuer may be excused from the requirements.

Following investigation by the Commission a referral to the National Enforcement Unit resulted in a successful prosecution of Ms Sharon Day and QED Limited in relation to investment offers to the public by QED without a registered prospectus or investment statement. The National Enforcement Unit has also filed similar charges against the directors of Five Star Debenture Nominees Limited.

Investigations are continuing into other issuers that may have breached the Act in this way. The Commission will comment on these matters as appropriate.

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