In August, the Commerce Minister announced the re-appointment of Commission Members Lloyd Kavanagh and Michael Webb for one year.
Lloyd Kavanagh, barrister and solicitor, was appointed to the Commission in 1999. He is the General Counsel
for New Zealand Milk, part of Fonterra Co-operative Group Limited and, previously, was the Corporate Secretary/Global
Manager, Legal & Secretariat for the New Zealand Dairy Board.
Michael Webb is a commercial barrister specialising in corporate, banking and securities law. He has extensive
legal experience in capital markets and corporate financing, corporate and securities law, insurance, superannuation,
collective investment schemes, funds management, insolvency, statutory management, financial restructuring, public policy and banking issues.
Lakeland Wealth Creators Limited
The Commission banned advertisements for an investment scheme being illegally promoted by Lakeland Wealth Creators Limited. Another company called Wespap Limited is also involved. The scheme offers improbably high returns.
The Commission banned advertisements for the scheme in September because they do not comply with the law. To be
promoted in New Zealand the scheme must have a registered prospectus and an investment statement. These do not exist
for the Lakeland Wealth Creators scheme.
The Commission's review of the initial public offer (IPO) of shares in Wakefield Hospital Limited (Wakefield) highlights the need to clearly identify the investment risks in offer documents.
"When inviting investment from the public rigorous due diligence must be applied to the risks associated with the
investment and these risks should be fully disclosed," Chairman Jane Diplock said. "Prospective financial information must comply with the relevant financial reporting standard."
Wakefield's IPO was made in August and September 2001. The company listed on the NZSE on 6 September 2001.
The NZSE's Market Surveillance Panel referred questions about the forecasts in the Wakefield IPO offer document to the
Commission in December 2001.
The Commission's review considered three aspects of the IPO:
whether the offer document adequately described the risk associated with the offer;
whether the prospective financial information properly set out the principal assumptions on which it was based; and
the process followed by the directors in preparing the offer.
The Commission formed the view that:
the offer document was misleading because it failed to adequately describe the risks faced by Wakefield relating to
the subcontracting of publicly funded cardiac surgery;
the prospective financial information was misleading because it failed to state that it was based on an assumption that Wakefield would receive significant revenue from publicly funded cardiac surgery in the 2001/02 financial year;
the prospective financial information was likely to have been misleading because it was presented as a forecast;
the directors did not undertake adequate financial due diligence to ensure investors were properly informed of:
the key risks relating to publicly funded cardiac surgery; and
the basis for the business judgement they had made relating to the key risks, and how their judgement affected the prospective financial information.
In the Commission's view the directors held an honest but mistaken belief that subcontracting with Capital Coast
District Health Board to provide cardiac surgery would resume in the 2001/02 year, and the directors believed that the
risk statements and assumptions were not misleading.
The findings indicate possible breaches of securities law. The report was referred to:
shareholders who subscribed to the IPO for them to consider whether any action should be taken; and
Reports of investment schemes promising improbably high returns appear to be increasing.
Chairman Jane Diplock says uncertainty in the share markets creates an attractive climate for the peddlers of illegal investments such as prime bank schemes.
"Their offers of high returns from secret schemes seem very attractive. They are often entered into by people who otherwise consider themselves prudent investors but who are lured to these scams by the interest rates offered."
Warnings about dubious investment schemes are published on our website www.seccom.govt.nz
We took part in an internet surfing campaign last month
to identify websites that do not comply with securities
law. "Surf day" is an IOSCO project and this year's
results for Asia/Pacific are being co-ordinated by the
Australian Securities and Investments Commission.
Information collected by "surfers" will be made available
to all the participating countries.
Lloyd Kavanagh, barrister and solicitor, was appointed to the Commission in 1999. He is the General Counsel
for New Zealand Milk, part of Fonterra Co-operative Group Limited and, previously, was the Corporate Secretary/Global
Manager, Legal & Secretariat for the New Zealand Dairy Board.
Michael Webb is a commercial barrister specialising in corporate, banking and securities law. He has extensive
legal experience in capital markets and corporate financing, corporate and securities law, insurance, superannuation,
collective investment schemes, funds management, insolvency, statutory management, financial restructuring, public policy and banking issues.
