Ads For Harbourside Property Fund Could Confuse
10 May 2002
Ads For Harbourside Property Fund Could Confuse Investors
The Securities Commission has banned advertisements for the Harbourside Property Fund, which offers securities in the Microsoft House development in Auckland’s CBD, because they are confusing.
Advertisements for these securities have appeared in newspapers and on the website of Dominion Funds Limited, the promoter of the securities.
The advertisements state, in very large type “$7.89 pa per $100 invested”. Immediately below this figure, in small print, the following explanatory paragraph is linked by an asterisk:
The before tax cash distributions to investors for the first 12 months for each $100 invested will be made up of $3.22 debenture interest and $4.67 debenture principal repayments (Resident Withholding Tax will be deducted from the debenture interest). Please see the registered prospectus and investment statement for further details.
“The Commission believes these advertisements are confusing,” Chairman Jane Diplock says. It considers that the prominence of the statement “$7.89 pa per $100 invested” gives a confusing impression of the returns from the securities. A person reading the advertisement may think the figure of $7.89 is equal to a return of 7.89% on the investment.
“Promoters of securities must take pains to ensure that advertisements, as well as investment statements and prospectuses, do not mislead or confuse the public”, Jane Diplock says.
The Commission does not propose to take any action with regard to the investment statement and registered prospectus for the Harbourside Property Fund.
The Commission commented on the potential for confusion with this sort of investment product in a March 2000 paper, Offer of Unlisted Interests in Commercial Properties – A Review. The paper is available on the Commission’s website (www.sec-com.govt.nz).