A court case has provided clarity around wholesale investor rules, especially on rules qualifying eligible investors.
The Financial Markets Authority (FMA) has welcomed the clarity provided by a High Court ruling on the rules qualifying “eligible investors” as wholesale.
The FMA sought clarification from the High Court on the interpretation of the eligible investor exclusion under the Financial Markets Conduct Act in respect of the use, confirmation, and acceptance, of eligible investor certificates in the wholesale investment sector.
Wholesale investment offers can promise attractive returns but don’t have the same protections of regulated offers such as retail investment offers. Wholesale investment offers are aimed at experienced investors, often with large sums of money to invest.
Eligible investors are a group of wholesale investors who must certify that they have the appropriate experience to invest in wholesale offers. The certificates they provide must be confirmed by an accountant, lawyer, or financial adviser.
“We welcome the Court’s findings, which provide clarity on how the law should be interpreted,” said FMA Chief Executive, Samantha Barrass.
“In taking this case stated, our focus was on ensuring confident participation in wholesale markets by offerors and eligible investors. In recent years, the FMA has noted an increase in complaints and concerns raised about wholesale offers of financial products, indicating increased investor participation.”
Barrass said wholesale investment offers can promise attractive returns but don’t have the same protections of regulated offers such as retail investment offers. Wholesale investment offers are aimed at experienced investors, often with large sums of money to invest.
“This case confirms that there is a responsibility on lawyers, accountants and financial advisers to correctly confirm eligible investor certifications made by investors, and that wholesale offerors are able to rely on those certifications and confirmations. That may include the need for lawyers, accountants and financial advisers to seek further information to determine whether the certification provided by the investor is correct,” she added.
“We will continue to work with MBIE on the appropriate policy settings for the wholesale investment regime, given the changing distribution methods and nature of wholesale offers. We will also continue to take action against conduct that misleads people into these wholesale investments, when they need the protections afforded by retail investments.”
Barrass said tackling retail investments dressed up as wholesale investments is an area of concern they have held for some time and remains strongly on the radar.
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