Ross Investments fined for misleading offer
20 April 2006
Ross Investments fined for misleading offer to investors
An Australian investment company and its Director have been fined a total of $24,000 for misleading claims made when trying to buy capital bonds and units from New Zealand investors.
In the District Court at Auckland, Robert Douglas Ross was fined $8,000 and Ross Investments (Aust) Pty Ltd was fined $16,000 for breaching the Fair Trading Act by making misleading claims.
Between August 2004 and March 2005 Ross Investments wrote to thousands of capital bond and unit holders of two New Zealand companies, Vector Limited and Kiwi Income Property Trust (KIPT). The letters implied that Vector and KIPT were in financial difficulties and that, to dispose of bonds and units that would otherwise be difficult to sell, investors should sell them to Ross Investments.
In fact both Vector and KIPT were in a good financial state, and the price offered by Ross was significantly below market value. Approximately 20 investors took up Ross's offer.
"As a result of actions by the Commerce Commission and the companies affected, Mr Ross largely failed in his attempt to profit from New Zealand investors," says Commerce Commission Director of Fair Trading Deborah Battell.
The misleading claims had cost the companies involved, Ms Battell says, with Vector and KIPT spending an estimated total of $42,000 on contacting shareholders to correct Ross's misleading claims, and on legal advice.
Ms Battell says misleading claims about investments also have wider impacts on the economy.
"Misleading claims undermine investor confidence and harm legitimate traders," Ms Battell says.
Ms Battell noted that Mr Ross had twice been warned by the Commission in 2003 over similar misleading representations. At an interview in 2005, a Commission investigator told Ross that the Commission considered the letter sent to KIPT investors was misleading. Two weeks after the interview, Ross sent a letter making the same claims to hundreds of Vector investors.
"Mr Ross paid the penalty for ignoring Commerce Commission warnings," Ms Battell says. "The Commission hopes this criminal conviction and fine will ensure that Mr Ross finally stops his attempts to mislead New Zealand shareholders."
Ms Battell says that the case was particularly significant because it involved the successful prosecution of an Australian based company and individual in the New Zealand courts. Under the Fair Trading Act, traders registered or based overseas can still be liable for misleading commercial behaviour that occurs in New Zealand.
"While the Commission will take action to stop traders misleading the public," Ms Battell adds, "the best protection for consumers is to seek independent financial advice when considering investment options."
Ross Investments has been previously warned on two occasions regarding the use of such representations in its marketing letters. The first warning issued, in June 2003, related to representations made in a series of letters between 21 February 2002 and 3 March 2003 to BIL Finance Limited capital note holders. The second warning was issued in July 2003 and related to a further letter sent to BIL Finance Limited capital note holders on 1 July 2003.