A Dunedin fund management company has had its licence to operate cancelled.
The Financial Markets Authority (FMA) announced the cancellation of Fund Managers Otago’s (FMO) licence on Wednesday.
In November last year, the FMA removed FMO as the manager of three mortgage trusts on the advice of the financial markets supervisor, Trustees Executors.
Since then, KPMG has controlled the funds on a temporary basis.
Now the authority has gone one step further and stripped FMO of its managed investment scheme manager licence as well.
FMA director of supervision James Greig said it was the first time a licence had been proactively cancelled.
The cancellation would effectively stop FMO from being able to operate in the retail investment sector.
"Cancelling a licence is one of the strongest regulatory actions we can take and it’s not a decision we take lightly."
The FMA found that the fund manager had a raft of issues within its operation.
Those included incorrectly calculating and disclosing returns in fund updates, entering into prohibited transactions and failing to manage certain funds within its statement of investment policy and objectives.
It also did not maintain appropriate records of key decisions and activities in relation to receiverships and did not calculate net tangible assets in accordance with the standard licence conditions.
In a statement, Trustees Executors confirmed that the regulatory process was followed in FMO’s licence cancellation.
It said it removed FMO as a fund manager in the best interests of investors.
Trustees Executors general manager of corporate trustee services Matthew Band said the cancellation of FMO’s licence by the FMA fully supported the actions it took to protect investors last year.
Prior to the removal of FMO as manager of the two mortgage trust funds, they were in the process of being wound up.
The third fund, which had about 600 investors, was in the process of being wound up, and the loan book sold.
Trustees Executors was continuing to work with KPMG on resolving outstanding issues, Mr Band said.
FMO board chairman John Gallaher declined to comment.
The cancellation of the licence was effective at 5pm on Wednesday.
The Companies Office yesterday listed FMO as an actively trading business.
