It said failures to follow required processes meant transactions breached the prohibition against related-party transactions.
The FMA alleged 75 causes of action from 2017 to 2022 against Booster and the directors and two senior managers.
It said each breach had a maximum penalty of $600,000 for the entity, and $200,000 for an individual.
The KiwiSaver manager made the investments without considering whether it was in the best interests of its scheme participants, the FMA alleged.
Booster responds
Booster denied any wrongdoing and said it was standing by “robust investment practices which have delivered good returns for customers”.
It said the FMA’s allegations relating to investment in wine businesses later amalgamated into Booster Wine Group (BWG) comprised less than 1.3 per cent of Booster’s overall funds under management.
“Booster rejects the FMA’s underlying contention that investments into BWG were not in the best interest of Booster’s investors,” managing director Allan Yeo said today.
“Booster stands behind its decision to invest in the wine sector via BWG. Tahi’s wine investments have grown annual production capacity from 700,000 litres to 9 million litres and Tahi has received over $13m of distributions from these businesses,” Yeo added.
“The investments required to achieve this were entirely consistent with Booster’s strategy to grow a geographically diverse and scaled wine business.”
He added: “The Tahi Fund has performed, delivering positive performance for investors. The Tahi Fund was introduced in 2017 to provide Booster’s retail offerings, such as its KiwiSaver and Investment Funds, exposure to direct investment into Kiwi companies as part of a diversified investment strategy.”
Booster said it took a disciplined approach to its investment decisions which were subject to rigorous governance processes including board oversight.
“Valuations of Tahi investments and published returns are independently audited. Booster expects that it will have the opportunity to explain these processes, which underpin the reported returns of the Tahi fund, as part of the proceedings.”
Yeo added: “All investment decisions were made by experienced and qualified people with the best interests of Booster’s investors being the key consideration.”
FMA head of enforcement Margot Gatland said the authority considered the alleged breaches to be serious.
She said civil proceedings were the proportionate response.
“The court’s determination will provide guidance to the market about the application of these core FMCA investor protection provisions, that managers and directors are required to comply with when making investment decisions on behalf of others.”
The FMA will be seeking declarations of contravention, pecuniary penalties to be paid to the crown, and an inquiry into damages.
-Reporting by Business Herald staff reporter and Rebecca Stevenson of BusinessDesk.
