The Council for Estate Agencies’ (CEA) Disciplinary Committee has sentenced Square Yards Singapore Pte Ltd (SYS) to a fine of S$7,500 for one charge of failing to provide a written advisory to an investor about the risks involved in purchasing foreign properties.
The Committee also imposed a condition to SYS’ license that it is not to market or transact in any foreign property for six months with effect from 1 March 2017.
In early August 2014, SYS and the US developer North Dakota Developments (NDD) LLC conducted a seminar in Singapore to promote and sell the Transhudson Hotel, Parshall Project, located in North Dakota, US.
The US developer also introduced its other project – the Great American Lodge, Montana Project, located in North Dakota, US to prospective investors at the seminar.
After the seminar, an investor bought a unit at the Transhudson Project through SYS at a purchase price of US$74,950 (S$107,010). He paid a partial payment of US$33,982.50 (S$48,519.05) to NDD LLC in mid-September 2014.
SYS subsequently received about US$3,900 (S$5,570) as commission for this transaction.
Investigations revealed that SYS had facilitated the sale of two other units – one investor had purchased a unit at the Transhudson Project, and another investor at the Montana Project. The three investors paid a total of US$112,279.50 (S$160,308.83) to NDD LLC.
Around 5 May 2015, the US Securities and Exchange Commission charged NDD LLC for allegedly fraudulently raising over US$62 million (S$88,52 million) from investors worldwide through the sale of interests in the development of housing projects based in the US, including the Transhudson and Montana Projects.
The three investors have not recovered the amounts that they have paid to NDD LLC, or any part thereof.
Throughout the transaction process, Wai Yin Peng Shermaine, Key Executive Officer of SYS, and her property agents did not provide the investor with a written advisory stating that he must conduct due diligence. They did not highlight to the investor the risks that are involved for foreign property consumers and that the transaction is subject to foreign laws, and to any change in policies and rules in the US.
One of the investors indicated that if he was given a written advisory message, he would have conducted more in-depth background checks into NDD LLC before committing to his purchase.
At all material times, SYS was required to comply with the Practice Guidelines for Estate Agents and Salespersons Marketing Foreign Properties (PGMFP). According to the PGMFP, estate agents appointed by the developer shall provide a written advisory message to consumers that they must conduct due diligence, drawing their attention that risks are involved for foreign property consumers, and that the transaction is subject to foreign laws, and to any change in policies and rules in the country where the property is located.
SYS was charged for breaching paragraph 16 of the Practice Guidelines for Estate Agents and Salespersons Marketing Foreign Properties (PGMFP) issued on 14 March 2014.