Wholesale investment offers can offer attractive returns. However, they are aimed at experienced investors, as they don’t offer the same protections as retail investments, which are open to the general public. Wholesale investments are also designed for those who have relatively large sums to invest.
A wholesale investor is a term defined in law and designated by New Zealand’s Financial Markets Authority (FMA) as people or organisations who have sufficient investment experience that they don’t require disclosure to assess the risks of investments. This is to prevent retail investors from making investment decisions they don’t fully understand and to protect them from potentially negative investment outcomes.
Qualifying as a wholesale investor
There are four ways for a person or organisation to qualify as a wholesale investor for all offers of financial products (the qualifications are slightly different regarding a particular offer). The qualifications include being:
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an investment business
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meeting the criteria in law to qualify as a habitual or experienced investor
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a ‘large’ investor
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a Government Agency.
The investment business qualification generally applies to an entity whose main business is investing in financial products, or they’re a registered bank, or a financial adviser. An individual can also qualify under the investment business criteria if they have a professional certification or adequate experience in finance.
A habitual, or experienced investor generally means they have at least $1 million invested in certain financial products.
Being qualified as a large investor means an individual or entity that has net assets or turnover of at least $5 million for the past two financial years.
The final way to qualify as a wholesale investor is through investment activity. This qualification requires an entity to have owned a financial portfolio worth at least $1 million or have carried out transactions to buy financial products worth over $1 million in the past two years. This qualification also applies to investment professionals involved in investment decision-making for at least two years, within the previous ten years.
An investor can also qualify as an eligible wholesale investor in relation to a particular offer of financial products through self-certification. This means you have sufficient experience acquiring or disposing of the financial product offered in a particular transaction to understand the information provided. To become an eligible investor, a financial adviser, qualified statutory accountant, or lawyer must sign the certification stating they are satisfied with your understanding of self-certification, including the potential consequences.
