A person looking at stockmarket changes on a tablet. Photo: 123RF
- Financial Markets Authority asks High Court to clarify wholesale investor regime
- Authority wants guidance on certificates for so-called experienced investors
- Differing interpretations sends FMA to court for clarity
- FMA previously warned some developers, including Du Val group, about wholesale offers
The High Court is being asked to clarify the issuing and use of certificates for knowledgeable investors needing less information and protection from finance sector laws.
The Financial Markets Authority has put a series of legal points to the court to clarify how the experience and knowledge of so-called wholesale investors is assessed for riskier financial investments.
"[We] seek the Court's determination on legal issues about the use, confirmation, and acceptance, of eligible investor certificates in the wholesale investment sector," the FMA said in a statement.
"The purpose of the proceeding is to provide clarity to the market ... and to ensure confident participation in wholesale markets by offerors and eligible investors."
Wholesale investors are deemed to be experienced with a greater appreciation of investment risks, and can participate in "wholesale" investments once certified by the likes of financial specialists, investment managers, lawyers, and accountants.
Property companies have used the special category allowing them to avoid publishing standard disclosure, governance and financial reporting requirements, because the offers are aimed at investors with sufficient knowledge and experience to assess an offer.
The offers often seek large sums but offer high interest rates.
The FMA has previously looked into such offers and warned certain developers, including companies in the now collapsed Du Val group, about how they have been pitched to non-expert investors.
An FMA review in 2022 found such an exemption had been extended to people citing KiwiSaver or term deposits as grounds for supporting that type of expertise, and some "wholesale" investors in Du Val entities have conceded they likely did not meet the criteria.
Among the questions the regulator is asking the High Court to determine are the conditions to assess validity investor certificates, such as whether the experience of an investor must be detailed, and whether a business making the offer must check if the certificate is valid.
