Financial product ads face stricter scrutiny; enforcement expands beyond big-name providers
This article was provided by K3 Legal
The Financial Markets Authority (FMA) are tightening up on fair dealing requirements. If you offer financial products, you need to start making changes now to avoid inviting broader inquiries from the FMA.
Fair dealing requires focusing on the resulting effect on prospective investors of the overall impression of relevant information. It is irrelevant whether you intend to mislead or deceive prospective investors. Requirements of fair dealing will vary dependent on context, namely the complexity of the offer, its risks, and the vulnerability of investors. Fair dealing requirements cannot be contracted out of by using a wholesale investor certificate.
Presently there are many financial products advertised in New Zealand which are loans secured by second mortgages, made through a variety of structures such as peer-to-peer lending. There are basic fair dealing issues that arise, such as the FMA’s requirement to publish information about the rate of default by borrowers using the facility in a fair, clear and transparent manner. Some platforms in the industry do not obey this basic requirement. Similarly, it is important to ensure risks are sufficiently communicated to investors.
While the FMA have been making headlines in their fair dealing enforcement matters involving big names like ASB, Westpac, AA insurance, Vero, and Tower, they are increasingly interested to ensure smaller providers are also playing by the rules.
A developing theme is FMA’s expectation that advertising and investor materials reflect the real-world experience of an investor, not just the technical accuracy of the statements made. This means providers must think beyond legal disclaimers and consider how their messaging is likely to be interpreted in practice. For example, headlines promising “secured returns” or “low-risk lending” can be problematic if used in the context of subordinated loans or distressed borrower profiles, even if full disclosure is buried elsewhere in the materials.
Another trend is the FMA’s scrutiny extending beyond isolated offers. If a provider promotes multiple offers under a single brand or investor dashboard, they need to ensure the overall impression given by the platform is balanced and accurate. This includes how information is presented on websites, in investor portals, and in investor onboarding documents.
The FMA is also placing increasing weight on systemic conduct failures, including inconsistent application of stated policies, such as risk grading, default reporting, or investor categorisation processes. In recent investigations, lapses in internal consistency have been treated as fair dealing breaches, even where the core offer itself was not misleading.
If you are a provider offering financial services, you need to ensure you have an adequate fair dealing policy — and actually follow it in practice.
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Helen Edwards, Director, K3 Legal
Helen leads the Private Wealth team at K3 Legal, where she specialises in creating and managing robust trusts and wills to safeguard client wealth. With 23 years of post-qualification experience in both New Zealand and London, Helen brings a wealth of knowledge and keen commercial acumen to her role. Her extensive background allows her to craft effective and practical solutions for addressing client problems.
In addition to her work in private wealth, Helen is involved in private equity investing, capital raising, and business/share acquisitions and dispositions.
Andrew Coffin, Solicitor, K3 Legal
Andrew works in the firm’s private wealth team, focusing on trusts and estates but with a particular interest regarding immigration and tax implications. He was admitted to the bar in 2020, graduating from the University of Auckland (honours, first class in both Law and Geophysics).
Andrew started his career in a large law firm, progressing quickly to work on a wide variety of legal and non legal private client matters including immigration. Andrew then worked in the financial sector, before joining K3 Legal. Andrew’s wide ranging legal and non-legal experience helps him understand legal matters from a client’s perspective and use a creative problem-solving approach.
