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Investor News Wrap: March 2021

Page last updated: 01 April 2021

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

New regulatory regime for financial advice

More than 10,000 financial advisers around New Zealand - including bank and insurance staff who give advice - are now being regulated under a new licensing system that came into force on 15 March.

Anyone who gives regulated financial advice to retail clients (ie ‘ordinary’ consumers) must now either hold or operate under a Financial Advice Provider licence, and adhere to a new Code of Conduct. All advisers are now obliged to put the interests of their clients first.

Growth in P2P lending and crowdfunding

The number of registered investors on peer-to-peer platforms rose to over 34,000 in the year to June 2020, according to the FMA’s latest report on the sector. Of them, 12,800 had open investments worth $624 million as at June 2020, up 8% on the previous year

At the same time, 5,300 investors were using licensed crowdfunding platforms, where the total raised was $34 million, including $16.5 million from retail investors. Crowdfunders backed 25 successful offers on licensed platforms, up from 19 the year before.

Public warned as cybercrime spikes

The FMA has issued a public alert about Evorich – an apparent multinational scam which lures investors with promises of big returns in cryptocurrency, and which has formerly been known as the “New Economic Evolution of the World” and “Skyway Investment Group”.

It follows a report by the government cybersecurity agency CERT NZ saying it had received 7,809 reports of cybercrime in 2020, up 65% on the previous year. Half involved phishing and credential harvesting, while one in seven included a financial loss, totalling $16.9 million.

Derivatives dealer downplays risk

Licensed derivatives issuer Rockfort Markets has been directed by the FMA to remove or amend misleading online statements related to the riskiness of derivatives.

Statements in Rockfort’s Facebook ads and on its website had created the impression that trading in derivatives is “safe”, or hadn’t presented a balanced view of the risks, when in fact it is inherently risky, particularly the Contracts for Difference (CFDs) offered by Rockfort.

Bank complaints data now online

Bank customers can now see how many complaints have been made about the different banks in New Zealand, out of the 27,000 lodged in the just last three months of 2020.

The Banking Ombudsman Scheme’s online complaints dashboard provides a snapshot of the number of complaints each receives, their market share, time taken to resolve complaints, and the proportion of complaints that are resolved. It provides a breakdown of the issues, including those about home loans, credit cards, internet banking or investments.

Property investors take note

The Government has announced new rules for residential property investors, whom it says currently comprise the biggest share of property buyers.

Investors who buy existing homes (ie not new builds) will now need to pay income tax on any gains if they sell within 10 years – double the previous five years – and from October won’t be able to deduct mortgage interest from rental income when calculating tax.

Against this backdrop, the FMA has also updated its investor guide on property syndicates, which let people buy shares in property investments, but can also be complex and risky.