Wholesale Investor Mischievousness

Recent commentary from business journalists who should know better appears to be directed at ‘screwing the scrum’ when it comes to the Financial Market Acts’ wholesale investor category.

Journalistic PR efforts are being directed at trying to import the word ‘sophisticated’ into the eligible investor certificate when no such requirement exists. (For those who don’t know, investors can be designated as ‘wholesale’ if they complete simple certification).

Nowhere in the applicable law is the word ‘sophisticated’ mentioned and therefore it follows that Parliament didn’t intend that a sophisticated investor test was necessary because, presumably, if they had, they would have included it.

It’s a bit rich the chorus of journalistic articles which appear to have the keen backing of regulated fund managers (those who don’t make wholesale offers), attempting to suggest that only a sophisticated investor can complete the certificate.

This blatant attempt to re-write the law is intolerable and those involved should know better. The words ‘sophisticated’ and ‘experienced’ have completely different meanings. What the certificate requires is that a potential investor wishing to achieve the wholesale designation, self-certifies they have sufficient previous experience in investing. This is a lot different from what the chorus of vested interests are implying with their faux expressions of concern that the middle classes might actually be making a few interesting high yielding investments.

There’s sound reasoning behind the current law in that – (a) it allows wide leeway for those with some investing experience (much of the NZ adult population) to invest in wholesale offers if they wish, with the attendant benefits of freedom of choice and self-determination and (b) the wholesale category enables up and coming smaller fund managers to develop their business models without the burden of an oppressive regulatory regime.

Of course, it may well suit the growing unholy alliance of regulated fund managers and the regulators themselves if no one else ever got started.

Clearly parliament intended that many Kiwis would be capable of signing an eligible investor certificate and one cannot help but think that if the present shouting on the issue results in regulatory change then that will be a further step along the path to extinguishing choice and self-determination, denying the population the right to make their own decisions in life, forcing investors into a type of state sanctioned capitalism where you don’t get to make any decisions for yourself, you just sit back and wait for the great socialist state to provide.

Bernard Whimp