The Financial Markets Authority (FMA) has issued formal notice to seven wholesale real estate investment companies for alleged non-compliant practices.
The authority conducted a review of wholesale investment in property-related offerings after a rise in complaints about how they were promoted and whether the right investors were targeted and accepted.
Warnings have been issued to the following entities: Black Robin Equity and Westwood Terraces BRE, Du Val Capital Partners and Du Val Built-to-Rent Group, E+O Property Syndication, Jasper NZ Investments, Provincia Property Fund, Williams Corporation Capital Partnership Group and Wolfbrook Capital.
The FMA said the key findings relate to the use, confirmation and acceptance of certificates from eligible investors.
Certification of eligible investors involves investors certifying that they have sufficient investment experience to assess the merits of a transaction, including value and risk.
The law requires the certificate to state the grounds for certification, and the FMA has said the stated grounds must be related to the matters being certified.
During the review, he found that some certificates were not confirmed by financial advisers, accountants or lawyers, which was a requirement.
He stated that other certificates were confirmed and accepted by the offerors, without reason or that the reasons were unrelated to what was certified.
Insufficient motives included selling a farm, owning a term deposit or KiwiSaver, owning a portfolio of rental properties, making a substantial profit from the sale of homes, and “the investment experience.
The authority has also found several practices in the market which it believes can increase the risk of an investor being misled.
The included offerings are promoted through a wide range of advertising platforms, including through social media, instead of targeting experienced investors.
“The wholesale investor exclusion is intended to allow bidders to make offers to expert investors without having to provide the disclosure intended to inform and protect non-expert investors,” the FMA’s acting chief financial markets officer said. , Paul Gregory.
“However, our review revealed practices in the marketplace that have allowed this exclusion to extend to people with little or no investment experience, with some citing KiwiSaver or term deposits as grounds for supporting their expertise,” he said.
Along with the warnings, the FMA also issued a report their findingsdefining industry expectations.
“The industry should consider how our findings, and the resulting warnings, could help improve how they promote offers and target and accept investors,” Gregory said.