“We were let down by improper legal advice, and it is disappointing to be in this position. However, we have since reviewed our legal service providers and taken steps to remediate the issue.
“We prioritise transparency and compliance in the interests of our investors and remain committed to fulfilling our disclosure obligations.”
Finbase said it had worked closely with the FMA to resolve the matter.
The FMA said that while Finbase sought to offer its Single Investment financial products to wholesale investors only, 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.
Louise Unger, FMA executive director, response and enforcement, said fair dealing in relation to wholesale offers was a particular focus for the regulator this year.
“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,” Unger said.
“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.”
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