New Zealand regulator orders Kalkine to stop sales calls after misleading conduct

Rick Steves

“We saw instances of Kalkine assuring prospective clients they would make money through stock investing with little or no regard to the inherent high risks and estimating clients could make monthly returns of 10-20% as a result of purchasing Kalkine’s research reports.”

The Financial Markets Authority (FMA) has ordered Kalkine New Zealand Limited to stop making outgoing sales calls to people in New Zealand following concerns about the entity’s misleading marketing conduct.

According to the regulator, Kalkine was the target of several complaints from members of the public regarding its marketing practices. This led the FMA to undertake a monitoring review, analyzing recordings of calls made by Kalkine sales representatives, and confirming that the content of those sales calls were “concerning”.

Kalkine holds transitional license from the FMA

Holding a transitional financial advice provider licence from the FMA, Kalkine has been responsible for several outgoing sales calls to persons in New Zealand offering the purchase of stock analysis reports, which provide buy, sell or hold recommendations.

The FMA found that Kalkine was likely to mislead prospective clients generally in relation to its advice service as it overstated the performance characteristics of its service and of certain financial products.

A number of fair dealing provisions in Part 2 of the Financial Markets Conduct Act 2013 and the requirements of Code Standard 2 of the Code of Professional Conduct for Financial Advice Services protect New Zealand residents from such conduct.

As such, the financial watchdog ordered Kalkine not to make outgoing sales calls to persons in New Zealand until the FMA is satisfied that Kalkine’s compliance processes are sufficient for outgoing sales calls to resume.

The direction requires Kalkine to provide the FMA a report within 20 working days demonstrating how the company will provide balanced information on risk and return to potential clients and will ensure all future communications do not include representations that are likely to mislead or deceive consumers, or that are unsubstantiated.

The FMA also found that Kalkine made misleading statements about where it is based: they said the company was based in Auckland, but the representatives did not clearly identify that the call was being made by an offshore related company of Kalkine on behalf of Kalkine New Zealand.

Little or no regard to the inherent high risks of stock investing

James Greig, FMA Director of Supervision, said: “We saw instances of Kalkine assuring prospective clients they would make money through stock investing with little or no regard to the inherent high risks and estimating clients could make monthly returns of 10-20% as a result of purchasing Kalkine’s research reports. In other cases, Kalkine made unsubstantiated statements about the success of its recommendations and said that markets would perform strongly in the near future, despite returns from equities being uncertain and volatile by nature.

“The overall impression created by Kalkine was that customers who chose to subscribe to its advice service could expect high and predictable returns, but no balancing comments were provided. It is unacceptable for a financial advice provider to make misleading statements when marketing its service. Of particular concern, Kalkine’s representations could entice people who may not be aware of the risks of investing into purchasing an advice subscription, and potentially financial products that are not appropriate for them. This can lead to significant financial loss, cause distress, and undermines confidence in New Zealand’s financial advice sector.

“Our direction is the appropriate regulatory response as it effectively pauses Kalkine’s telemarketing operations in New Zealand until it can satisfy us that it has improved its practices.”

Kalkine has engaged constructively with the FMA throughout the regulator’s inquiries.

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