The case relates to the firm's mortgage fund
The Financial Market Authority has warned Du Val Capital Partners (DVCP), the general partner of the Du Val Mortgage Fund, and Du Val Group for engaging in misleading or deceptive conduct.
FMA said DVCP and Du Val Group may have breached section 19 of the Financial Markets Conduct Act 2013 when it communicated to investors in December about Duval’s plan to restructure, where it proposed to wind up the fund and convert it into shares in a new Duval company, which it said could potentially be listed on the NZX or another exchange. Another communication was sent out in January, advising investors that it will suspend all cash distributions on their units.
FMA said those statements may have been deceptive or misleading because investors were not informed of the underlying reason for the board’s resolution to suspend and capitalise distributions, or of their rights relating to the suspension.
“Investors in Du Val’s Mortgage Fund have not had the information necessary to make properly informed decisions to accept or reject the proposal,” said Paul Gregory, FMA executive director of response and enforcement.
“In particular, investors were misled about the reason Du Val has suspended the prominently advertised cash distributions, which was because Du Val’s board could not approve a cash distribution which would leave the fund unable to meet its other obligations. And, that the proposal to convert cash distributions into units in the fund is not permitted under the terms of the limited partnership agreement governing the investment, and investors are therefore not obliged to accept that decision.”
The FMA said DVCP and Du Val Group should receive a formal warning concerning this conduct, and that it is in the interest of fair and transparent financial markets that this warning should be published.
“The warning means Du Val investors have more accurate information on the public record about the proposal which, if they wish, means they can better engage with Du Val and/or seek advice about their options,” Gregory said. “Du Val should now reflect on its fair dealing obligations and whether it has provided accurate information to its investors. For the FMA’s part, we reserve the right to take further action in the matter.”
