Financial Markets Authority issues stop order against Syndicated Trusts Limited

Syndicated Trusts is prohibited from distributing communications including advertisements or offers for its financial products. Photo / Michael Cunningham

The Financial Markets Authority has issued a stop order against financial services firm Syndicated Trusts Limited.

The FMA is warning the public to be wary of dealing with the company, which it has ordered to stop advertising or accepting money for its financial products.

The stop order was issued because Syndicated Trusts contravened several aspects of the Financial Markets Conduct Act.

Its newspaper advertisements, which included confusing statements about the interests potential investors would receive with references to debt security term deposits, equity share dividends and co-operative company membership, failed to make it clear that Syndicated Trusts was only seeking preliminary interest for its offer and failed to prepare and lodge a product disclosure statement with the registrar before making the advertisements.

The FMA considered the advertisements were likely to confuse or mislead people, and may have been making unsubstantiated statements, including that Syndicated Trusts was a co-operative when it was not and that investors would receive a return of "6.5 per cent to 10.5 per cent plus dividend".

On several occasions the FMA sought clarification from Syndicated Trusts directors at the time John Lehmann and Xinghua Fan about the advertisements relating to the offer, or planned offer, of financial products.

In a statement Lehmann said the company was disappointed in the stop order and would be applying to have the order lifted.

He said the company had "every intention to comply with the FMA".

Stop orders are rarely issued.

The last order the FMA issued was in 2015 against Auckland-based finance company Green Gardens Finance Trust, which at the time it said it was offering investments illegally. That was the first time the FMA issued such an order.

The FMA is urging anyone who has deposited funds with Syndicated Trusts to contact the FMA. The order can be applied without the need to go to court.

A stop order is a statutory power the FMA can use to stop particular behaviour of force a market participant to take steps to prevent further harm.

"Stop orders are used by the FMA when a business consistently fails to comply with the law, or respond to our concerns. It is an offence to fail to comply with a Stop Order and we are warning the public to exercise extreme caution when dealing with STL," FMA general counsel Nick Kynoch said in a statement.

The Herald has contacted Syndicated Trusts for comment.

Syndicated Trusts is prohibited from distributing any communications including advertisements in newspapers, social media posts and websites or offers for its financial products.

The order remains in place until the FMA suspends or revokes it.