Fund Managers Otago (FMO)

Fund Managers Otago (FMO) was the managed investment scheme (MIS) manager of three schemes: Capital Mortgage Income Trust, the NZ Mortgage Income Trust, and NZ Mortgage Income Trust (No 2) Fund.

In November 2020, the supervisor, Trustees Executors Limited, decided it was in the best interests of investors to remove FMO as manager of three schemes and requested the FMA appoint KPMG Restructuring Services as temporary manager to manage these three schemes.

Of the three schemes, two are legacy schemes that have been closed for several years and are in the process of being wound up: Capital Mortgage Income Trust and the NZ Mortgage Income Trust. The third scheme, the NZ Mortgage Income Trust (No 2) Fund, has approximately 600 investors. This fund was open in November 2020, but the removal of FMO as manager also means this fund is being wound up.

July 2021

The FMA cancelled FMO’s managed investment scheme (MIS) licence after finding the firm had materially breached its licence obligations.

The FMA found FMO’s inadequate compliance and governance arrangements had resulted in continued material breaches of its licence obligations. These included:

• Disclosure: Incorrectly calculating and disclosing returns in fund updates
• Related party benefits: entering into prohibited related party transactions
• Compliance with SIPO (Statement of Investment Policy and Objectives): failing to manage certain funds within their SIPO limits for persistent periods of time
• Record keeping: not maintaining appropriate records of key decisions and activities in relation to receiverships
• Financial resources: not calculating net tangible assets in accordance with the standard licence conditions

November 2020

Trustees Executors Limited, the supervisor of three schemes operated by FMO, determined it was in the best interests of investors to remove FMO as manager of those schemes. The removal was initiated due to issues relating to FMO’s governance, solvency of the manager and regulatory breaches.

As a result, the FMA appointed KPMG Restructuring Services NZ Limited as a temporary manager for the three schemes.