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Financial Markets Authority issues formal warning to Du Val group for misleading investors over why it suspended cash distributions

Investing / news
Financial Markets Authority issues formal warning to Du Val group for misleading investors over why it suspended cash distributions
Paul Gregory, FMA
Paul Gregory, FMA

The Financial Markets Authority (FMA) has issued property development firm Du Val Capital Partners with a formal warning for misleading investors over the suspension of cash distributions.

Du Val halted cash payments from its Mortgage Fund in January this year, telling investors it was looking to restructure the fund ahead of a potential listing on the NZX or another stock market.

Cash distributions promised to investors would instead be converted into units in the fund at a 25% premium. 

The FMA said investors were told the cash payments had been suspended in the context of this restructure. But this was misleading, as it was actually because paying out to investors would leave the company unable to pay other liabilities.

In essence, the regulator said Du Val didn’t have enough cash to pay investors and all its other costs — and so had suspended distributions. 

Paul Gregory, the FMA’s executive director of response and enforcement, said investors in Du Val’s Mortgage Fund had not been given enough information to properly accept or reject the proposal.

“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.” 

Also, investors were not obligated to accept the decision, as the proposal was not permitted under the terms of the limited partnership agreement governing the investment.

The regulator said Du Val’s statements may have been misleading or deceptive, because investors were not informed of the underlying reason the board had suspended and capitalised distributions. 

Gregory said the property developer had been issued a formal warning which it was now making public. 

“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.”

He said the company should reflect on its 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,” he said

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26 Comments

Remind me, how does a Ponzi scheme work?

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Wow, a warning. Was it a sternly written warning, at least?

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It was also moist.

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I would say that Du Val may well be close to insolvency, And that, if it is the case,  has implications for Director liability if they continue to operate.   

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Not sure about that- don’t they have 100m of capital from Canadian fund? 
2 bits of news from DuVal today- this warning and Kenyon launching his ‘Masterclass’ product where you pay to access his knowledge skills and wisdom.

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All from a beach in FIJI

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Another Williams Academy 

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2 bits of news about that then:

1, 'Masterclass' is a trademark of Masterclass (the global online education company) so he is in the sh#t even further if they find out before he folds it.

2, See above

 

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Does not look good.  Have to launch masterclass with spruiker, Goodey, to get cash to pay investors (or lifestyle?).

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That would explain why their sales team were so hungry for investment funds.

One email enquiry set of a barrage of emails and calls.

Didnt feel right, so no investment.

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They were not sales teams- they were ‘investment advisors’!!! And a mili second of  looking into their backgrounds for relevant experience and you’d have see the depth of it all… spoiler alert- shallow! Good call giving it a miss

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It’s good that we will be rid of this sort of dross over the coming year.

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Wow. So is that it?  They get a warning and things carry on?  NZ really hasn't advanced very much since the heady days of the 1980s.

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Their doc/reality show could actually become quite good in the unlikely event it actually covers all this instead of just being a hagiography. 

Which reminds me to watch https://en.wikipedia.org/wiki/The_Queen_of_Versailles again.

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Don't complain that you haven't been warned, it's finance companies all over again. Repeat after me, unlisted property trusts have NO LIQUIDITY when you really need it. When prices start falling you're just a passenger along for the ride hoping you don't end up on the rocks.

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My 2023 predictions are slowly coming together :) 

 

- Economy

 

Recession here and abroad. Unemployment to end year around 6.5%, and will still be travelling in the wrong direction. Building industry to go tits up as noone is starting any builds, and plenty are getting finished. Multiple big construction company failures (Williams Corp & Du Val by August).

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Noticed they kept the company yacht, which is a good idea, as they may need that, to leg it.

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The bit he seems to realise is that if you don't have private jets and mclarens in the good times, you are more prepared for the bad times....

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This video has not aged well: https://www.facebook.com/WilliamsCorporation/videos/how-we-can-pay-a-10…

'How do we pay our investors a 10% return' is no longer a rhetorical question. Looks like a lot of investors starting to ask 'how the f**k are you going to pay my 10% return'...

The patronising simplicism of his explanation and pie chart give me covid/Jacinda/team of 5 million vibes 

0% Cost of Equity lol

 

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Actually I thought he said zero equity.

Even if I heard wrong I'm probably right now.

From memory total interest will work out about $55m +. That's a few sales to pay for it.

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From the FMA 

”The reason Du Val has suspended the cash distributions which were a big feature of the advertisements is because Du Val’s board could not approve a cash distribution that would leave the mortgage fund unable to meet its other obligations."

 

Being that these payouts are also obligations, does that confirm they're insolvent?

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They will act on it when its too late
MISLEADING INVESTORS
The Financial Markets Authority has issued a formal warning to Du Val Group (a Manukau-based property developer) for misleading investors over why it suspended cash distributions. This is not the first time Du Val has been subject to FMA action (in fact it may be the sixth time).

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AN AMERICAN BANK RUN?
SVB Financial Group (Silicon Valley Bank) is scrambling to reassure its venture capital clients that their money is safe after a capital raise led to its stock collapsing -60% and contributed to wiping out over -US$80 bln in capitalisation. The bank launched a US$1.75 bln equity raise to shore up its balance sheet and navigate declining deposits from startups struggling for funds amid increased spending. Markets are wondering whether an SVB collapse could create a domino effect. It comes after crypto bank Silvergate abruptly shut down. It certainly is already downgrading bank share valuations in the US. One to watch.

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Du Val and Steve Goodey (ex Rich Mastery) are launching a property masterclass. 

More money is about to shift from the many to the few. 

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Too late now for some but wise words (at any time) - 

https://www.cnbc.com/video/2022/09/29/investors-should-focus-on-the-ret…

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