20 October 2022

FMA formally warns wholesale property investment firms after discovering non-compliant practices

Media Release
MR No. 2022 – 43

The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko has found several conduct concerns in the wholesale property investment sector, and issued seven formal warnings.

The FMA commenced a review of wholesale investments into property related offers after noting an increase in complaints made and concerns raised about how such wholesale offers were being promoted, and whether the appropriate investors were being targeted and accepted.

The FMA’s most significant findings related to the use, confirmation, and acceptance, of eligible investor certificates¹. The FMA found some certificates were not confirmed by financial advisers, accountants or lawyers (as is required), while other certificates were confirmed - and accepted by offerors - with no grounds or the grounds did not relate to the matters certified. Insufficient grounds included the sale of a farm, owning a term deposit or KiwiSaver, having a rental property portfolio, making substantial profits from selling houses, and “experience in investment.”

The FMA required information from 23 entities across the industry, including advertising, offer documents and process documentation. Seven warnings have been issued by the FMA to offerors using non-compliant eligible investor certificates: Black Robin Equity Limited and Westwood Terraces BRE Limited; Du Val Capital Partners Limited and Du Val BTR GP Limited; E+O Property Syndication Limited; Jasper NZ Investments Limited; Provincia Property Fund Limited; Williams Corporation Capital Partnership GP Limited; and Wolfbrook Capital Limited.

The FMA will be making referrals to the relevant professional bodies for the lawyers, accountants and financial advisers who confirmed the deficient eligible investor certificates.

The FMA also found several practices in the market which it considers may increase the risk an investor may be misled, including:

  • offers promoted through a broad range of advertising channels, including through social media, rather than targeting experienced investors;
  • promotional material promoting high returns and low risk or ignoring risk;
  • offerors using digital advertising strategies, such as search optimisation, that may target non-expert investors (for example, promotions for wholesale property development projects targeting advertising at people using search terms such as “Sharesies” and “term deposit”);
  • promotional materials that were not clear the offer was only available to wholesale investors;
  • some instances of aggressive or “hard-sell” techniques, although this did not appear to extend to investors being pressured to self-certify as eligible investors.

Paul Gregory, FMA Acting Director of Capital Markets, said: “The wholesale investor exclusion is intended to allow offerors to make offers to expert investors without having to provide the disclosure designed to inform and protect non-expert investors. However, our review has found practices in the market which have allowed this exclusion to extend to people with little or no investment experience, some citing KiwiSaver or term deposits as grounds for supporting their expertise”.

“The FMA is highly concerned with the conduct of some offerors and the lawyers, accountants and financial advisers confirming eligible investor certificates,” Mr Gregory said.

Alongside the warnings, the FMA published a report on its findings, setting clear expectations for the industry, including when an eligible investor certificate is complete and can be relied on.

“The industry should consider how our findings, and the warnings arising from them, could help improve how they promote offers and target and accept investors. The FMA will continue to scrutinise the wholesale property investment sector, especially given the volatile market environment affected by rising interest rates and falling property prices.

“We urge all investors to carefully consider their ability to understand and assess the risk of investments they are offered, or seek independent and professional advice, before signing an eligible investor certificate,” Mr Gregory said. “Potential investors should be asking themselves, ‘Is 8%, 10% or even 15% a good return relative to the risk of the investment, and am I in a position to be able to properly assess that risk?’ And if that seems tough, perhaps the potential investor should get expert help or reconsider whether the investment is appropriate for them.”



Download Thematic review of use of the wholesale investor exclusion PDF

Listen to '5 mins with the FMA' podcast #4: Wholesale property investments report

¹ The eligible investor certification involves investors certifying they have sufficient investment experience to assess the merits of a particular transaction, including value and risk. The Financial Markets Conduct Act 2013 requires the certificate to state the grounds for the certification. The FMA considers this requires the stated grounds to relate to the matters certified. Where the stated grounds are not relevant to the certification, the FMA considers the certificate is invalid.


Media contacts:


Andrew Park
FMA Media Relations Manager
[email protected]
021 220 6770

Campbell Gibson
FMA Senior Adviser, Media Relations
[email protected]
021 945 323