1. Investors
  2. Resources
  3. Investor News Wrap: August 2021

Investor News Wrap: August 2021

Page last updated: 31 August 2021

News from the month that Kiwi investors should know, including new financial regulations, fraud and scams, research, reports and offshore developments.

Online lender admits to charging unreasonable fees

Online lender Harmoney will repay $7m to approximately 37,000 borrowers it over-charged on loans entered into between 2014 and 2021, the Commerce Commission announced on 27 August.

The Commission said Harmoney had been charging borrowers a ‘platform fee’ that it added to loans it had arranged, and that the nature and amount of that fee had changed several times, initially percentage-based and up to $1,500, then changed to a fixed fee of up to $500.

It said Harmoney had admitted the fees were unreasonable, agreed to compensate borrowers, and agreed to charge no more than $165 for establishment fees on new consumer loans for five years.

Online platforms a hit with Kiwi investors

Eight out of 10 Kiwi investors have a more favourable view of investing since using online investing platforms, while a third now have a better understanding of financial markets.

That’s according to research for the FMA by Kantar Public into the behaviours and intentions of the large number of new investors who had started investing over the past couple of years.

Around 80% of the 2000 adults surveyed said they buy shares or other investments and hold them for the long term. Conversely, just 2% said they buy and sell multiple times a day.

Almost a third had jumped into an investment in the last two years because they didn’t want to miss out, while 27% said they’d invested in something based solely on someone’s recommendation.

Sharesies warned over insufficient anti-money laundering processes

The FMA has issued a formal warning to Sharesies Limited and Sharesies Nominee Limited for failing to have sufficient anti-money laundering procedures, policies, and controls in place.

In the FMA’s view, Sharesies had failed to obtain information from most customers about the nature and purpose of the proposed business relationship; failed to obtain sufficient information to determine if certain customers should be subject to enhanced customer due diligence; and not completed identity verification for up to 7,815 customers who had an account balance of more than $1000, as part of standard customer due diligence.

Sharesies must now obtain information from all its current customers to show their reasons for using the platform, and adequately verify the identity of all customers and restrict withdrawals or transfers until those checks are completed.

FMA Director of Supervision James Greig said the issues “appeared to be symptomatic of a business that has grown quickly without ensuring fully effective processes and controls were in place.”

Tighter lending rules edge closer

The Reserve Bank of New Zealand said on August 3 that it would "soon begin consulting on ways to tighten mortgage lending standards" after signing an updated MoU with the Minister of Finance.

The updated MoU adds debt serviceability restrictions to the list of tools available to the central bank to enable it to be more targeted in its approach to tackling financial stability risks.

The RBNZ said it would consult on a proposal to further reduce the amount of bank lending to those with high loan-to-value ratios (LVRs) from 20% to 10% of new loans, from as soon as 1 October.

It would also consult in October on implementing Debt-to-Income (DTI) restrictions and/or interest rate floors, said Deputy Governor Geoff Bascand.

CEO accused of market manipulation

The FMA has filed civil High Court proceedings against the CEO of NZX-listed New Talisman Gold Mines Ltd for alleged information-based market manipulation and making false and misleading representations.

The case relates to anonymous posts Matthew Geoffrey Hill allegedly made about the company on an online investor forum between 2013 and 2020. The FMA claims he made dozens of anonymous posts in a thread about New Talisman. The company is not party to the proceedings.

FMA Head of Enforcement Karen Chang said the case is an important reminder that information-based market manipulation can occur on social media and forums.