Wholesale property fund manager, Du Val, has ended its legal battle against the Financial Markets Authority (FMA) after losing in a landmark court decision last week.
Du Val had challenged the FMA over an order to amend advertising deemed as ‘misleading’ by the regulator last October.
Despite finding some of the regulatory legal arguments were “inapt, Justice Gault ruled against the Du Val position that its online ads did not breach the ‘fair dealing’ provisions of the Financial Markets Conduct Act.
Gault backed the FMA case that Du Val had targeted ‘inexperienced investors’ with its marketing campaign, albeit leaving some grey areas in the definition of ‘wholesale’.
Last October, Paul Gregory, FMA director investments, said in a released that the “case was particularly troubling because Du Val appeared to be using social media and other online channels to target less experienced investors”.
“Firms making wholesale investment offers must comply with fair dealing provisions, and in particular, must not mislead or deceive potential investors,” Gregory said at the time.
“… We have become increasingly concerned about wholesale offers spreading into mainstream advertising, especially through social media, where the notion highly experienced investors are the target market becomes questionable. We expect entities relying on the wholesale exclusion to learn from this case and reflect on their own marketing practises.”
The FMA has since cracked down on other providers, including issuing a product stop order against The One Management fund earlier this year, while also embarking on a ‘thematic review’ of the wholesale sector.
Bowing to the court decision, Matt Hawkes, Du Val senior legal counsel, said in a release: “We felt it was very 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.
“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 wholesale fund is offered by Du Val Capital Partners, an offshoot of the wider real estate development Du Val Group founded by Kenyon and Charlotte Clarke in 2016 – although the origins of a property-based business of the same brand goes back to 2013.
“Outside of leading the Du Val Group, alongside COO Charlotte Clarke, Kenyon is a passionate entrepreneur who enjoys sharing his knowledge and helping others navigate the dynamic territories of contemporary investment and entrepreneurship,” the group’s website says.
The FMA was unable to comment prior to publication.