Feelings of unrest have arisen among Groen Invest investors. The Management Board of Groen Invest has recently disseminated confusing and incorrect information concerning the investments and the role of the Netherlands Authority for the Financial Markets (AFM). The AFM has since received many questions concerning this issue from worried investors. For this reason, the AFM would like to clarify a number of issues.The AFM rejected Groen Invest's application for a licence at the end of 2007
Groen Invest applied for an AFM licence for offering investment objects in 2006. The AFM rejected the licence application.
An AFM investigation showed that Groen Invest does not have sufficient financial expertise and knowledge with respect to the Groen Invest's business operations. Groen Invest was also unable to demonstrate that it has honest and controlled day-to-day management.
The District Court supports the AFM's opinion
The Rotterdam District Court held, in its judgment of 15 January 2009, that the rejection of Groen Invest's licence application was correct. The Rotterdam District Court's judgment can be viewed at www.rechtspraak.nl (LJN: BH0726, Rotterdam District Court, 08/3181).
Groen Invest therefore has to settle ongoing contracts
Because Groen Invest did not obtain a licence, it has to cease its activities in respect of which it is required to have a licence. This means that Groen Invest is no longer allowed to sell new investment objects and it has to terminate its ongoing investment object contracts. Termination must take place in consultation with the investors. Possible ways of terminating the contracts include; (i) Groen Invest transfers the existing contracts to a provider who does have a licence for providing investment objects; (ii) Groen Invest pays back the money paid in to the fullest extent possible; (iii) Groen Invest converts the existing contracts into a different investment product (for example shares or bonds) or a product that is not subject to the AFM's supervision. The AFM does not demand that Groen Invest accelerate its cutting down or sale of trees.
Groen Invest is responsible for settling matters in a proper manner and in consultation with its investors. It is therefore not the case that the AFM determines how Groen Invest should settle its matters. The AFM urged Groen Invest several times to engage professional assistance. The AFM does supervise during the settlement. This means that the AFM can take measures to ensure a proper settlement in the interest of the participants.
Groen Invest has not yet settled
The AFM has requested Groen Invest, in the context of the settlement, to draw up a settlement plan in which Groen Invest indicates in what way it will terminate the contracts and how and when it will inform its participants thereof. The AFM has consulted with Groen Invest on these issues on many occasions.
Groen Invest has submitted a plan that provides that Groen Invest will sell the ownership to the Dutch grounds and use its proceeds to acquire forests in Rumania to, as Groen Invest puts it, comply with the promised wood volume guarantee.
The AFM repeatedly asked Groen Invest to provide a substantiation of this plan in order to assess whether Groen Invest has drawn up a realistic settlement plan. Groen Invest, however, was unable to provide sufficient financial and management-related substantiation. It was unable to explain whether there are sufficient financial resources available to make a successful relaunch.
The AFM appoints a curator under the Wft to guarantee the interests of the investors
The AFM has decided, in the interest of the investors, to appoint a curator under the Wft. This is not a liquidator. This curator is charged with helping Groen Invest settle the contracts and to guarantee the interests of the investors. Groen Invest will remain responsible for proper settlement, but the curator may approve or disapprove Groen Invest decisions in the interest of the investors.
What does the AFM require of Groen Invest?
The AFM has, in the interest of the investors, imposed three conditions on Groen Invest. The AFM requires:
- that Groen Invest informs the investors properly and in full about its situation and that it substantiates the settlement plan so that investors can take a balanced decision. The current contract for the sale of the Dutch grounds does not guarantee that the resources released will benefit the investors. The contract, moreover, contains provisions of which it is clear in advance that Groen Invest will not be able to comply with them.
- that Groen Invest offers the investors a choice between participation in the new investment plan in Rumania or to terminate or change the contract in another way (for example by paying the remaining money).
- that Groen Invest continues to comply with legislation and regulations, for example with respect to the new investment.
Groen Invest has not complied with any of these three conditions.
What are the consequences?
Groen Invest's situation is highly uncertain. The AFM sees the following option to continue. Groen Invest complies with the requirements set and settles expeditiously with the investors. The curator can help in that respect. Groen Invest is still responsible for ensuring proper settlement. The AFM strives, together with the curator, for Groen Invest to inform its investors as accurately and as fully as possible so that they gain insight into the state of their investment. The future of Groen Invest will become highly uncertain if progress is not made quickly.
The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.