Media Release
MR No. 2025 – 45
The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko - has issued a warning to HP Capital Limited, trading as Finbase, for serious breaches of the Financial Markets Conduct Act 2013 (FMC Act) and Financial Markets Conduct Regulations 2014 (FMC Regulations).
The warning relates to Finbase’s offers and advertising of, and its use of sponsored AdWords in relation to, its Single Investment financial products.
The FMA was satisfied Finbase made regulated offers of its Single Investment financial products but did not comply with the disclosure requirements of Part 3 of the FMC Act and its notice obligations in relation to the Small Offers exclusion in the FMC Regulations. While Finbase sought to offer its Single Investment financial products to wholesale investors only, the FMA was satisfied it incorrectly applied the Small Offers exclusion and the Wholesale Investors exclusion in the FMC Act, due to Finbase:
- exceeding the $2 million limit under the Small Offers exclusion across multiple 12-month periods; and
- failing to comply with the requirements of the Wholesale Investors exclusion on which it relied; specifically, certain investors did not pay at least $750,000 on acceptance of the offer, or they did not pay an amount which, when combined with amounts previously paid for financial products of the same class issued by Finbase, totalled at least $750,000.
The FMA was also satisfied Finbase contravened certain fair dealing provisions of Part 2 of the FMC Act because:
- Finbase published advertisements for its Single Investment financial products in the Farmers Weekly, The Post, Kia Ora, and The New Zealand Herald which failed to specify those financial products were available for wholesale investors only, creating the false impression that investment in the financial products was open to the general public and misleading the public as to the nature and suitability of the financial products; and
- Finbase’s use of sponsored AdWords such as “term deposit”, “term investments NZ” and “low risk investment NZ”, targeting investors searching for term deposits or similar low risk investments, created a false impression that Finbase’s Single Investment financial products were comparable to term deposits or similar low-risk investments when they were not; Finbase’s Single Investment financial products differ significantly in nature, have materially different characteristics, and have a different investment suitability, from term deposits and similar low-risk investments.
The FMA was satisfied a public warning was an appropriate, fair and proportionate regulatory response. The FMA considered the seriousness of the contraventions, Finbase’s reliance on inaccurate or inadequate legal advice in relation to the Small Offers exclusion or its incorrect interpretation of that advice and the remediation steps subsequently taken by Finbase. The FMA acknowledges Finbase has taken remedial steps to avoid similar contraventions in the future.
FMA Executive Director, Response & Enforcement, Louise Unger said:
“Fair dealing in relation to wholesale offers is a particular focus for the FMA this year, as we seek to address problems in the market and improve market participant behaviour.”
“This warning demonstrates the importance of issuers correctly using and applying the regulated offer exclusions if they want to ensure their offer does not become a retail offer. It also emphasises the need for issuers to take considerable care with the way they advertise an offer to prevent potential investors from being misled about the nature, characteristics and suitability of a financial product”
ENDS
