Property development company Du Val has lost its appeal in the high court to overturn the Financial Markets Authority’s orders to pull the group’s online ads that it deemed misleading or deceiving to investors.
In his court judgment yesterday, Justice Ian Gault dismissed Du Val’s appeal and said the FMA was entitled to costs, which he expected would be agreed on.
Justice Gault said he considered some of the FMA’s reasons of how Du Val had breached section 19 of the Financial Markets Conduct Act 2013 to be “inapt” – but didn’t think the direction order from the FMA contained a material error of law as Du Val’s lawyers had argued.
The FMA first pinged Du Val in October last year for a social media campaign around its Mortgage Fund – a fund which claimed to offer investors high returns with a similar level of risk to a term deposit.
Ordered to pull ads
The financial market regulator told Du Val to pull its ads – but the property company said the online ads didn’t breach “fair dealing” provisions in the law.
In April, both parties appeared in the high court to argue their case with Du Val’s lawyer Davey Salmon QC appearing opposite Jenny Cooper QC before Justice Gault in Auckland via video link.
Justice Gault accepted the FMA's claim Du Val targeted "inexperienced investors", but didn't go so far as to accept the regulator's submissions that the property developer targeted the public at large. The judge said there could be varying levels of sophistication for wholesale investors, who didn't automatically equate to being experienced investors.
In a media statement about Justice Gault's ruling, Du Val said it respected the high court’s decision to uphold the direction order issued by the FMA in relation to the company’s advertising to wholesale investors.
Du Val’s senior legal counsel Matt Hawkes said the property group took its compliance obligations and responsibility to investors “very seriously” and recognised “the important role” the FMA had as New Zealand’s financial market regulator.
Du Val had been complying with the FMA’s direction order since it was issued in September last year, Hawkes said, and was “confident in its compliance with all the laws applying to the advertisement of wholesale investment offers”.
“We felt it was important to test the direction order through the courts to provide valuable clarity around the rules for how wholesale fund offers can be advertised to prospective investors,” he said.
“Especially as other direction orders had been made against other wholesale and retail fund managers, including Simplicity for advertising relating to its KiwiSaver Fund.”
The FMA has been approached for comment.