On 12 September 2011, the Netherlands Authority for the Financial Markets (AFM) imposed an administrative fine of €62,500 on Homburg Capital B.V. (Homburg; currently Veninda Beleggings Maatschappij B.V.) for unclear television advertising in connection with the Homburg Stoneridge bond. This constitutes a violation of Section 4:19 of the Financial Supervision Act (Wft).
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(1) The AFM has declared the objection against the fine unfounded while supplementing its reasons.
(2) The AFM has declared the objection against the 1:97 publication of the fine unfounded while supplementing its reasons.
(3) In this interlocutory judgment, the Rotterdam District Court offered Homburg Capital the opportunity to submit additional data to the AFM in connection with the determination of Homburg Capital’s financial capacity and the AFM was afforded the opportunity to adjust the decisions on the appeal on the basis of these further data and the interlocutory judgment.
(4) In this final judgment, the Rotterdam District Court declared Homburg Capital's objection well-founded and set the fine at €10,000.
(5) Homburg Capital submitted an appeal.
(6) The AFM submitted an appeal.
(7) The Trade and Industry Appeals Tribunal (CBb) set aside the judgments of the Rotterdam District Court and declared Homburg Capital's appeal unfounded, which means that the fine has become final.
In any event, Homburg advertised the Stoneridge bond on television on 11 April 2010, 18 April 2010 and 09 May 2010. In the television advertisement, Homburg emphasised the fact that the investor receives 10% fixed interest on the bond and that certainty is offered by the fact that a right of first mortgage was created in respect of new property. The television advertisement only emphasises the advantages without dealing with the conditions (and therefore the risks) that are attached to these advantages and the Stoneridge bond.
The television advertisement fails to mention that interest payment is not made in cash but is credited to the outstanding principal sum each year. In addition, payment of interest does not take place until there are net proceeds from the sale or letting of apartments. This creates the risk that after four years the proceeds realised by Homburg Stoneridge are not sufficient to repay the outstanding sum, including the interest due that has been credited.
Suggesting certainty on the one hand and on the other failing to mention the conditions and risks of this certainty means that Homburg failed to present a balanced picture of the bond. The television advertisement provides an inaccurate picture of the bond, which means that a potential investor is unable to oversee the relevant characteristics of the product. That means that the television advertisement fails to comply with the statutory requirement of 'clarity' as laid down in Section 4:19(2) Wft.
The new penalty act (Penalty Scheme in Financial Legislation (Amendment) Act) entered into force on 1 August 2009. This act applies as the violation took place after 1 August 2009. The basic amount of the fine for violation of Section 4:19, first subsection, of the Wft is €500,000. When determining the amount of this fine, the AFM took into account the seriousness and duration of the violation, the culpability and financial capacity of Homburg.
If you have questions or complaints, please contact the AFM's Financial Markets Information Line: 0800-5400 540 (free of charge), or from abroad +31 20 797 3976.
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