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Commission tries out new powers

Wednesday 18th June 2003

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The Securities Commission has accepted written undertakings from three parties in respect of a forestry investment scheme.

The parties are NZFIL 3 Limited (the company), NZ Forestry Investments Limited (the promoter) and Ross Anthony Collins, sole director of each entity. All three are of Papamoa, Tauranga.

Before the company was incorporated the director and the promoter offered shares in the company to the public without a registered prospectus or investment statement. This is a breach of the Securities Act 1978.

The offer of shares was intended to raise capital for a forestry investment scheme. The forest is in the Wanganui region.

"The Commission prohibited all advertising for this offer on 1 November 2002," Chairman Jane Diplock said. "We issued a public warning about investing in this and other schemes that do not have the required offer documents."

On 14 March 2003 the company registered a prospectus for the offer and began offering shares to the public. In April and May 2003 the Commission received complaints from the public about the offer and some advertisements for the offer.

The Commission considered the offer documents and the advertising for the offer.

"In the Commission's opinion the investment statement did not comply with the law and was likely to mislead, deceive, or confuse prospective investors about the investment," Diplock said. "Advertising for the offer distributed by some agents also did not, in our opinion, comply with the law and was likely to mislead, deceive, or confuse investors."

The Commission raised its concerns with the company. The company, the promoter, and the director acknowledged the Commission's concerns and offered certain written undertakings in respect of them. The undertakings include the following:
· to amend the investment statement and advertising so that they comply with the law;
· to appoint an independent director; and
· to carry out regular compliance audits of documentation and conduct.

"The Commission has agreed to accept these undertakings as an alternative to the other courses of action available under the Securities Act, such as prohibiting advertising and prohibiting distribution of the investment statement," Diplock said. If the parties fail to comply with the undertakings, they are enforceable through the Court.

This is the first time the Commission has used its powers to accept enforceable undertakings. These powers were given to the Commission when the Securities Act was amended in December 2002.

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