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False advertising can cost money, freedom

The modern world provides a number of advertising avenues for commercial companies, not-for-profit organisations, community and social groups and charity trusts to promote their products and services. Advertisements, published as paid or unpaid notices entail responsibilities, both for the advertiser and the medium that carries such advertisements. It is common for some individuals and organisations to perceive these advertisements merely as pieces of information. However, as the following Sections of the Crimes Act show, the onus could be on both parties. We publish these in public interest. The Serious Fraud Office has published a number of provisions of the Crimes Act, indicating the instances in which it may intervene as an enforcement agency.

Section 58: Criminal liability for misstatement in advertisement or registered prospectus

1 Subject to subsection (2), where an advertisement that includes any untrue statement is distributed (a) the issuer of the securities referred to in the advertisement, if an individual; or (b) if the issuer of the securities is a body, every director thereof at the time the advertisement is distributed—commits an offence

2. No person shall be convicted of an offence under subsection (1) if the person proves either that the statement was immaterial or that he or she had reasonable grounds to believe, and did, up to the time of the distribution of the advertisement, believe that the statement was true

3. Subject to subsection (4), where a registered prospectus that includes an untrue statement is distributed, every person who signed the prospectus, or on whose behalf the registered prospectus was signed for the purposes of section 41 (1) (b), commits an offence

4. No person shall be convicted of an offence under subsection (3) if the person proves either that the statement was immaterial or that he or she had reasonable grounds to believe, and did, up to the time of the distribution of the prospectus, believe that the statement was true

5. Every person who commits an offence against this section is liable (a) on conviction on indictment to (i) imprisonment for a term not exceeding five years; or (ii) a fine not exceeding $300,000 and, if the offence is a continuing one, to a further fine not exceeding $10,000 for every day or part of a day during which the offence is continued; or (b) on summary conviction to (i) imprisonment for a term not exceeding 3 months; or (ii) a fine not exceeding $300,000 and, if the offence is a continuing one, to a further fine not exceeding $10,000 for every day or part of a day during which the offence is continued

Companies Act offences

Section 377: False statements

1. Every person who, with respect to a document required by or for the purposes of this Act (a) makes, or authorises the making of, a statement in it that is false or misleading in a material particular knowing it to be false or misleading; or (b) omits, or authorises the omission from it of, any matter knowing that the omission makes the document false or misleading in a material particular commits an offence, and is liable on conviction to the penalties set out in section 373(4)

2. Every director or employee of a company who makes or furnishes, or authorises or permits the making or furnishing of, a statement or report that relates to the affairs of the company and that is false or misleading in a material particular, to (a) a director, employee, auditor, shareholder, debenture holder, or trustee for debenture holders of the company; or (b) a liquidator, liquidation committee, or receiver or manager of property of the company; or (c) if the company is a subsidiary, a director, employee, or auditor of its holding company; or (d) a stock exchange or an officer of a stock exchange, knowing it to be false or misleading, commits an offence, and is liable on conviction to the penalties set out in section 373(4)

3. For the purposes of this section, a person who voted in favour of the making of a statement at a meeting is deemed to have authorised the making of the statement.

Source: Serious Fraud Office, Auckland

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