A KiwiSaver provider has had civil proceedings filed against it by the Financial Markets Authority (FMA).
The authority said in a statement on Wednesday Booster Investment Management Ltd (BIML) allegedly breached related party transaction provisions, accusing directors of investing in wine firms using KiwiSaver funds and not revealing conflicts of interest.
Booster and directors allegedly committed multiple breaches between 2017 and 2022, "arising from investments made by BIML into a related, limited partnership, the Booster Tahi Limited Partnership (Tahi), which in turn invested into a series of domestic wine businesses, later amalgamated into the Booster Wine Group (BWG)", the FMA said.
"The investors referred to in this case are retail investors and the funds involved come from three Booster Schemes (the Booster KiwiSaver Scheme, Booster Super Scheme and Booster Investment Scheme... Booster has advised that as at May 31, 2024, 24 of the 61 retail funds Booster manages have exposure to BWG, including six KiwiSaver Funds."
However, Booster Investment Management told Newshub it "strongly disputes allegations" and that it would "will defend its position vigorously".
"It denies any wrongdoing and stands by its robust investment practices which have delivered good returns for customers," its managing director Allan Yeo said in a statement.
FMA is alleging the following:
- BIML breached its duties and obligations as the manager of the schemes when investing in the manner described above;
- the individuals involved used their positions improperly as directors or senior managers, in circumstances where conflicts of interest and related party benefits were not properly managed, when making investments of Scheme funds to benefit Tahi and the BWG; and
- failures to follow required processes meant that the relevant transactions were made in breach of the prohibition against related party transactions.
"The FMA considers the alleged breaches to be serious and that civil proceedings are the proportionate response. The allegations are centred around important governance provisions of the FMCA (Financial Markets Conduct Act), including fiduciary duties of managers and related party transactions," authority head of enforcement Margot Garland said. "The court's determination will provide guidance to the market about the application of these core FMCA investor protection provisions, that managers and directors are required to comply with when making investment decisions on behalf of others."
However, Yeo said Booster stands behind its decision to invest in the wine sector via BWG.
"Tahi's wine investments have grown annual production capacity from 700,000 litres to 9 million litres and Tahi has received over $13m of distributions from these businesses," he said.
"The investments required to achieve this were entirely consistent with Booster's strategy to grow a geographically diverse and scaled wine business.
"The Tahi Fund has performed, delivering positive performance for investors."
He said the investment was less than 1.3 percent of its overall funds under management as at May 31, being up to 2.65 percent for KiwiSaver funds and up to 3.83 percent for non-KiwiSaver funds.
"We have cooperated with the FMA throughout a lengthy investigation process and we welcome the opportunity that we are now being provided to constructively engage with the FMA's supervision team to focus on what we do today and how we do things going forward," Yeo said.
"We will also strongly defend the allegations in the proceedings.
"Booster looks forward to the opportunity ahead to demonstrate that it acts in its customers' best interests. We stand by the good work we have done and we will continue to innovate for the benefit of our investors."
Newshub.
