The collapse of suspected Ponzi scheme Ross Asset Management could prompt changes to legislation that treats Kiwis with $500,000 to invest the same as banks or professional investors.
Parliament is expected to pass the Financial Markets Conduct Bill later this year, which, Commerce Minister Craig Foss said, was "critical to restoring investor confidence in New Zealand's financial markets".
But an investor lobby has criticised the bill because it will offer lower protections to investors with $500,000 by categorising them as "wholesale".
This maintains the status quo, putting the investors in the same category as institutional investors, even if they have no experience of financial markets. They are afforded lesser protection because the law treats them as savvy.
Financial Markets Authority (FMA) chief executive Sean Hughes conceded the wholesale investors definition may have helped Ross Asset Management, a suspected Ponzi scheme, avoid scrutiny. The regulator was likely to push for changes in the definition.
The FMA had no intelligence on executive chairman David Ross before his financial adviser authorisation.
"His business statement said 90 per cent of his clients were wholesale," Hughes said. "Automatically, in terms of our risk profiling, he slipped down the radar, because we thought, 'well, generally speaking the law assumes that wholesale investors can look after themselves' ".
In late October, the FMA raided Ross' offices. Of the almost $450 million the 900-odd Ross clients believed was being managed on their behalf, little over $11 m has been established as existing. Fairfax NZ
- © Fairfax NZ News
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