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FMA cancels Fund Managers Otago licence

Page last updated: 07 July 2021

Media Release
MR No. 2021 – 28

The Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – has cancelled the managed investment scheme manager licence of Fund Managers Otago (FMO).

This is the first time the FMA has proactively cancelled a MIS manager licence.

James Greig, FMA Director of Supervision, said the FMA considered FMO’s material contraventions and determined it was no longer capable of being a fund manager.

“Cancelling a licence is one of the strongest regulatory actions we can take and it’s not a decision we take lightly,” he said. “It effectively stops a business from operating in the retail investment sector.”

The FMA found FMO’s inadequate compliance and governance arrangements had resulted in continued material breaches of its licence obligations. These included:

  • Disclosure: Incorrectly calculating and disclosing returns in fund updates
  • Related party benefits: entering into prohibited related party transactions
  • Compliance with SIPO (Statement of Investment Policy and Objectives): failing to manage certain funds within their SIPO limits for persistent periods of time
  • Record keeping: not maintaining appropriate records of key decisions and activities in relation to receiverships
  • Financial resources: not calculating net tangible assets in accordance with the standard licence conditions

Mr Greig said cancelling FMO’s licence was the appropriate and proportionate response to material contraventions of its licence obligations.

The cancellation is effective 5pm, 7 July 2021 and was made under section 414(3) of the Financial Markets Conduct Act 2013.

ENDS

Background:

In November 2020, the supervisor, Trustees Executors Limited, decided it was in the best interests of investors to remove FMO as manager of three schemes and requested the FMA appoint KPMG Restructuring Services as temporary manager to manage these three schemes.

Of the three schemes, two are legacy schemes that have been closed for several years and are in the process of being wound up: Capital Mortgage Income Trust and the NZ Mortgage Income Trust. The third scheme, the NZ Mortgage Income Trust (No 2) Fund, has approximately 600 investors. This fund was open in November 2020, but the removal of FMO as manager also means this fund is being wound up.

Media contacts:

Andrew Park
FMA Media Relations Manager
andrew.park@fma.govt.nz
021 220 6770

Campbell Gibson
FMA Senior Adviser, Media Relations
campbell.gibson@fma.govt.nz
021 945 323