FMA doesn't get what it wants

The Financial Markets Authority went to court seeking more clarity around wholesale investors, but didn't get changes.

Tuesday, September 23rd 2025, 10:29PM

The regulator was seeking clarification from the High Court on the interpretation of the eligible investor exclusion under the Financial Markets Conduct Act in respect of the use, confirmation, and acceptance, of eligible investor certificates in the wholesale investment sector. 

Its case comes on the back of a number of offers made to “wholesale investors only” which offered high returns which the FMA argued where “undesirable practices.”

“In recent years, the FMA has noted an increase in complaints and concerns raised about wholesale offers of financial products, indicating increased investor participation," it says.

Justice Sally Fitzgerald said, “Certainly it appears that the process may have ‘fallen down’ in some instances that were put before me by way of example.”

However, she ruled if the system wasn’t working it was a matter for Parliament.

“If there is a need to ‘re-balance’ the approach to the eligible investor exclusion, or to prescribe further information which must be included in an eligible investor certificate, that is a matter for Parliament and not the Court.”

Legal firm MinterEllisonRuddWatts welcomed the decision as preserving “the certainty and simplicity of the eligible investor regime, which is crucial for start-ups, private equity, and venture capital industries”.

Russell McVeagh National Practice Group Chair, David Raudkivi and solicitor Kirsty McCulloch says on Lexology that the FMA's submissions indicate that it was looking to the court to apply a higher standard around wholesale investor certification.

"Its submissions sought to require that a valid certificate must expressly describe the investor's previous experience in acquiring or disposing of financial products and experience which tends to enable the investor to assess the merits of the offer at issue, including the risks of the financial products, their own information needs and adequacy of information provided to them."

Although the FMA did not necessarily get what it was seeking, chief executive, Samantha Barrass welcomed the judgment.

In respect of the questions before the court about the approach to eligible investor certificates the Court found:

An eligible investor certificate must state the grounds for certification but need not detail sufficient investment experience in order to be valid, provided the grounds are not incapable of supporting the certification.
An offeror must be satisfied that the eligible investor certificate is valid. However, where the certificate has confirmation from a financial adviser, lawyer or accountant, the offeror may rely on that as confirming the investor has sufficient investment experience to participate in the offer. An offeror is not required to assess the investor’s actual ability to evaluate the investment or the adequacy of the grounds stated by the investor in the certificate.
The Court confirmed that if an offeror could not rely on the eligible investor certificate, disclosure must be made as a retail offer, unless the investor is otherwise classified as a wholesale investor.

She says there is a responsibility on lawyers, accountants and financial advisers to correctly confirm eligible investor certifications made by investors, and that wholesale offerors are able to rely on those certifications and confirmations.

She suggested the FMA may seek changes to the wholesale investor regime: “We will continue to work with MBIE on the appropriate policy settings for the wholesale investment regime, given the changing distribution methods and nature of wholesale offers."

« Retirement Commissioner to step down

Adviser jailed over theft charges »

Special Offers