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AFM demands information for consumers on Hypothecaire Vastgoed Obligaties IV

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Hypothecaire Vastgoed Obligaties IV B.V. (HVO IV) must provide additional information to consumers who have invested in the bonds issued by the company. If HVO IV does not comply within the allotted period, it must pay €4,000 for each day that it fails to provide the information. The Netherlands Authority for the Financial Markets (AFM) imposed this order for incremental penalty payments on HVO IV on 28 June 2012.

HVO IV is not registered with the AFM. The company has offered bonds in the Netherlands as defined in the Financial Supervision Act [Wet op het financieel toezicht, or Wft]. The bonds offered by HVO IV had a total nominal value per bond of €50,000 or the total equivalent value of the offer over a 12-month period was less than €2,500,000. The offer therefore qualified for the exemption from the prospectus requirement as described in the Wft.

An investigation by the AFM into HVO IV has revealed that consumers who invested money have not received sufficient information. HVO IV must send a letter to the consumers concerned informing them of the following:

  1. The fact that HVO III and HVO IV have collectively raised a total of approximately €3,200,000 from investors in the Netherlands through the issuance of bonds.
  2. The fact that of this approximately €3,200,000 in funds raised by HVO III and HVO IV, around €1,540,000 has been directly transferred to Regge Zekerheidsholding.
  3. The fact that A has transferred the following sums:
    - approximately €1,045,000 to Regge Zekerheidsholding
    - €70,000 to Management B.V.
    - €51,000 to B, the sole investor in A.
  4. The sum that HVO IV has lent to HVO Germany to invest property in Germany.
  5. The amount of cash held by A for HVO IV.
  6. Information regarding the financial position (balance sheet) of Regge Vastgoed Investments in connection with the statement of the guarantee issued with regard to all liabilities of HVO IV.

This information is extremely important to consumers who own bonds issued by HVO IV. They will thus be in a position to assess the manner in which HVO IV has implemented the agreement with the bondholders, the financial position of HVO IV and A and the question of how HVO IV guarantees repayment of the bonds by means of collateral (provides information on the risk profile of the bonds). In the opinion of the AFM, the bondholders must at least be informed regarding these facts in order to be able to make a decision as to whether to retain or dispose of the bonds, or to be able to exercise their contractual entitlement.

The failure of HVO IV to provide this information constitutes unfair trading practice. This is a contravention of the Consumer Protection (Enforcement) Act [Wet handhaving consumentenbescherming]. The AFM’s decision may be tested in the courts by the interested parties.

Tighter supervision

The AFM has intensified its supervision of unlisted property investments. The AFM is intensifying its supervision as a result of signals of incorrect property valuations, fraud and financial problems at various providers. The AFM has noted that investors are frequently not or not adequately informed regarding such matters. This means that they are in fact being misled.

One of the instruments developed by the AFM to further improve its supervision is a property risk radar system. Property investment funds, whether currently subject to supervision by the AFM or not, will be screened using risk indicators. The AFM has investigated a number of property funds on the basis of this screening. The tighter supervision forms part of the government’s integrated plan to combat abuse in the property sector.

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.

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