Securities Commission bans advertising for Propertyfinance Securities Limited moratorium restructure

The Securities Commission has banned advertisements by Propertyfinance Securities Limited (PFSL) for a proposed restructure of its moratorium arrangements.

The Commission believes that the advertisements were likely to mislead investors about the relative advantages and disadvantages of the proposal as compared with the alternative option of receivership and did not comply with the law.

PFSL has been advertising its proposed restructure in roadshow presentations to investors and in briefing notes published on its website.

PFSL is a finance company that has been in moratorium since December 2007. Before then it had been in receivership since August 2007. The Commission understands it has been developing a proposal to restructure its moratorium since failing to meet a scheduled payment in December 2008. Its proposal involves varying the terms of the existing securities held by debenture holders, which amounts to a new offer of securities under the securities law.

The Commission believes that the roadshow presentations were likely to mislead investors because they set out only the positive aspects of the restructure proposal, and only the negative aspects of the receivership option. By omitting the potential disadvantages to investors of the proposal and the potential advantages of receivership they did not provide balanced information.

In the Commission's view the offer does not comply with the law because there is no registered prospectus. Under the law securities can not be advertised until there is a registered prospectus, except in certain limited circumstances which do not apply in this case.

Moratorium documents are a form of offer documents and are therefore subject to the same rules as other offer documents.

"Investors need to be provided with full information about both the advantages and disadvantages of moratorium and receivership options so they can make informed investment decisions," Securities Commission Chairman, Jane Diplock, says. "Investors should be provided with full information, including the assumptions directors have made if they say a moratorium will result in better returns and the risks compared with those of receivership."

The PFSL directors have told the Commission that they had received legal advice on the presentation and believed the contents to be true and accurate, however they respect the views and findings of the Commission.

The Commission has alerted investors to what they should consider before voting on a moratorium proposal. This guidance is available on the Commission's website at www.seccom.govt.nz.