KiwiSaver provider Booster sued by Financial Markets Authority

Wednesday, 12 June 2024

Default KiwiSaver provider Booster is being sued by the Financial Markets Authority (FMA) over an investment in a related-party wine company, but says it will “defend its position vigorously”.

Booster did not believe its default status was threatened by the FMA’s action, and in a statement said it strongly disputed allegations made by the FMA.

The FMA has filed civil proceedings against Booster Investment Management alleging breaches of the Financial Markets Conduct Act by the company and five directors and senior managers, Allan Yeo, Paul Foley, David Beattie, Nicholas Craven, and former director Brendon Doyle.

The authority says funds in three of Booster’s investment schemes, including its KiwiSaver scheme, had money invested in related-party wine company Booster Wine Group, with some of the money invested when the wine company was underperforming.

The regulator alleges the investments were not in investors’ best interests, and were made in breach of prohibitions against related party transactions.

The allegations covered a period from 2017 to 2022, the FMA said.

In its statement, Booster said it “rejects the FMA’s underlying contention that investments into Booster Wine Group were not in the best interest of Booster’s investors”.

Booster and the directors denied any wrongdoing and stood by Booster’s “robust investment practices”, which it said had delivered good returns for customers, it said.

The investment in the wine group made up less than 1.3% of Booster’s overall funds under management, Booster said.

Margot Gatland, the FMA’s head of enforcement, said: “The FMA considers the alleged breaches to be serious, and that civil proceedings are the proportionate response.”

She said when the High Court made a ruling on the case, it would provide guidance to the market on the application of core Financial Market Conduct Act investor protection provisions.

The FMA would be seeking fines, and potential damages for investors in the funds which invested in the wine group.

The FMA made no mention of whether its action threatened Booster’s status as a default KiwiSaver provider.

There are six default KiwiSaver providers hired by the government to manage money for people who join KiwiSaver, but do not actively select their own scheme or funds.

Default status guarantees a flow of new business as new people join KiwiSaver.

However, Booster’s notice of appointment as a default provider posted on the government Disclose Register said it Booster has general responsibilities to ensure its KiwiSaver scheme was administered “in accordance with good industry practice and the relevant requirements”.

It also said the appointing ministers (Finance Minister Nicola Willis and Commerce and Consumer Affairs Minister Andrew Bayly) may terminate the appointment of a default provider if it had “committed a material breach … of the Financial Markets Conduct Act or regulations” made under it.

Booster said it stood behind its decision to invest in the wine sector through Booster Wine Group, and its strategy was to grow a “geographically diverse and scaled wine business”.

It said the investment had delivered positive performance for investors.

“All investment decisions were made by experienced and qualified people with the best interests of Booster’s investors being the key consideration,” it said.

“Booster looks forward to the opportunity ahead to demonstrate that it acts in its customers’ best interests,” it said.

The FMA said Booster had cooperated with its investigation.