By Gareth Vaughan
The Financial Markets Authority (FMA) says the public should be extremely cautious if dealing with New Zealand registered building society General Equity, formerly General Equity Building Society.
"FMA considers that General Equity has engaged in misleading and deceptive conduct, including the way it has represented how it is regulated in New Zealand," the regulator said in a statement.
"Although General Equity is registered as a building society, it does not carry on business as a deposit taker in NZ, and is not subject to Reserve Bank or trustee oversight. General Equity has not issued shares to the public. Most of General Equity’s business is conducted off-shore. The FMA is not aware that any New Zealanders have suffered a loss at this time. However, given General Equity’s past conduct, we consider that anyone dealing with General Equity should exercise extreme caution."
"FMA has ordered General Equity to include the FMA warning prominently on the main page of any website operated by, or on behalf of, General Equity under section 49 Financial Markets Authority Act 2011 (a warning disclosure order)," the FMA added.
Interest.co.nz has written extensively about General Equity. One story, in August last year, was based on an interview with Mark Bayoud, General Equity's director of international business, and Murray Greer, its chairman. Among things to come out of the interview was Bayoud's claim General Equity was "comprehensively" regulated by the FMA, something the FMA refuted at the time. Bayoud also said General Equity was setting up a wealth division as it moved to offer financial services within New Zealand.
And, Bayoud said, a fund managed by General Equity that purportedly held US$6.2 billion in mining assets was owned by a small group of Asian businessmen with the assets held predominantly in Thailand and Indonesia. According to the FMA's warning this fund; "does not hold the assets General Equity claims it holds and was used by General Equity to give a misleading impression of adequate asset backing to support the issuance of letters of credit by General Equity."
Greer used to be ANZ director of property and construction finance and was managing director of Rifleman Finance between 2006-08.
An FMA spokesman told interest.co.nz the timing of the regulator's warning was a result of issues identified in the FMA's monitoring and based on a concern General Equity "continues to present misleading statements about where it's regulated and has done since we started monitoring it." A warning was viewed as the best way to help prevent any potential harm to New Zealanders since General Equity has a presence here, the FMA spokesman said.
In terms of General Equity's past conduct the FMA referred to, the spokesman said this related to the building society making "continuous" misrepresentations about being regulated (by the FMA) when it clearly isn't. The other aspect was the fund General Equity claimed held billions of dollars worth of assets.
"In our view it is not true or fair, - what they're trying to say about that fund, and we don't believe it holds those assets," the FMA spokesman added.
And here's the FMA's full warning
Warning: Exercise extreme caution when dealing with General Equity
The Financial Markets Authority (FMA) has issued a warning to the public about General Equity (previously named General Equity Building Society), a New Zealand building society.
FMA warns any persons dealing with General Equity to exercise extreme caution before obtaining any financial services, or acquiring any financial products, from General Equity. In particular, FMA warns those persons to take into account that:
In FMA’s view, General Equity has engaged in conduct and has made statements that are misleading and deceptive in connection with its status as a financial markets participant and how it is regulated in New Zealand.
General Equity is not a licensed financial markets participant in New Zealand, does not have to meet any prudential requirements (including minimum capital requirements) in New Zealand and is not a New Zealand bank or a non-bank deposit taker. In FMA’s view, General Equity has engaged in conduct and has made statements that are misleading and deceptive in connection with The General Equity Asset Builder Fund No 1 (ABF1).
In FMA’s view, the ABF1 does not hold the assets General Equity claims it holds and was used by General Equity to give a misleading impression of adequate asset backing to support the issuance of letters of credit by General Equity.
Most of General Equity’s business is conducted outside of New Zealand. That business is subject to the laws of, and oversight of financial markets regulators, of those places where it conducts that business. FMA has limited ability at law to take action in connection with financial services provided by New Zealand entities outside of New Zealand.
FMA regulates New Zealand's financial markets. Our main objective is to promote fair, efficient and transparent financial markets. To find out more about us and for help with investing see www.fma.govt.nz.