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October 1997

News Release

CONFUSING AND MISLEADING ADVERTISEMENTS

Over the past year or so the Commission has had occasion to examine a number of advertisements for syndicated investments. The most prominent of these have been advertisements related to interests in forestry syndicates and property syndicates.

The Commission considers that often the quality of information about projected returns has not been good. There have been confusing statements about the nature of the projected returns, investment period, taxation effects, and the procedures for realising benefits at the end of the investment period. In addition it has been the Commission's impression that many assumptions upon which projected returns are calculated have not been based on sound research, or if they have, this has been on the basis that the research has not been correctly applied.

The Commission has endeavoured to encourage issuers to improve the quality of offering documents. From time to time issuers have agreed to restate the terms of their offer for the purpose of ensuring that prospective investors are better informed of scheme prospects.

We are no longer confident that this strategy is achieving the necessary improvement in the quality of advertisements and offering documents. Issuers and promoters are reminded that no advertisement should be likely to deceive, mislead or confuse. If an advertisement offends against these requirements then the Commission has power to prohibit distribution of that advertisement. It is the intention of the Commission to use its powers of prohibition and cancellation more readily in the future.

At the same time the Commission expects prospective investors in schemes of this type to read the offering documents with great care and to ensure that they understand the manner in which projected returns are prepared, the assumptions upon which they are based, and the risks involved in the schemes. The law has been recently amended to require scheme managers to prepare an Investment Statement and to ensure that the prospective investor has received a copy of this document before the application for investment is accepted. The Investment Statement is designed to assist the non-expert investor. All investors are urged to study the Investment Statement carefully before they decide to invest.

Euan H. Abernethy
Chairman
30 October 1997

Contact:
Catherine Chapman, Communications Officer, 04 472 9833 ext 840

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