Background
Fund Managers Otago (FMO) was the manager of three managed investment schemes: the Capital Mortgage Income Trust, the NZ Mortgage Income Trust, and the NZ Mortgage Income Trust (No 2) Fund. In November 2020, the schemes’ supervisor, Trustees Executors Limited, determined that FMO should be removed as manager in the best interests of investors, citing concerns about governance, the manager’s solvency, and regulatory breaches. Following this decision, the Financial Markets Authority (FMA) appointed KPMG Restructuring Services NZ Limited as temporary manager to oversee all three schemes. Two of the schemes were already closed and in wind‑up, while the third—NZ Mortgage Income Trust (No 2) Fund—remained open at the time but was also placed into wind‑up as a result of the management change.
In July 2021, the FMA cancelled FMO’s managed investment scheme licence after concluding that the firm had materially breached its licence obligations. The regulator found persistent and serious deficiencies in FMO’s compliance and governance arrangements, including incorrect calculation and disclosure of returns, prohibited related‑party transactions, failure to operate within investment policy limits, inadequate record‑keeping, and non‑compliance with financial resource requirements. These findings reinforced the earlier decision to remove FMO and confirmed that regulatory intervention was necessary to protect investors and ensure orderly wind‑up of the affected schemes.
