FMA directs Kalkine to stop making outgoing sales calls to New Zealanders after misleading marketing conduct

Media Release
MR No. 2022 – 30
30 August 2022

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

Kalkine describes itself as an equities research firm and holds a transitional financial advice provider licence from the FMA. Its sales representatives have made numerous outgoing sales calls to persons in New Zealand offering the purchase of stock analysis reports, which provide buy, sell or hold recommendations.

Following several complaints from members of the public regarding Kalkine’s marketing practices, the FMA undertook a monitoring review and analysed recordings of calls made by Kalkine sales representatives to New Zealanders. The FMA found the content of those sales calls concerning. In particular, they contained representations made by Kalkine which:

1. were likely to mislead prospective clients generally in relation to Kalkine’s advice service;
2. overstated the performance characteristics of its service and of certain financial products referred to during sales calls (i.e. listed stocks);
3. were likely to mislead clients in relation to Kalkine’s primary place of operations; and
4. were, in some instances, unsubstantiated.

The FMA considered Kalkine had materially breached various fair dealing provisions in Part 2 of the Financial Markets Conduct Act 2013. The FMA also considered Kalkine’s marketing conduct fell short of the requirements of Code Standard 2 of the Code of Professional Conduct for Financial Advice Services, which requires all persons who provide regulated financial advice to act with integrity.

The direction stipulates that Kalkine must not 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.

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.”

The FMA considered Kalkine also made misleading statements about where it is based. When call recipients asked where Kalkine representatives were calling from, they were told 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.

The FMA noted that Kalkine had engaged constructively with the FMA throughout the regulator’s inquiries.

ENDS

Download FMA direction to Kalkine New Zealand Limited

Update

In December 2022, the FMA informed Kalkine that they could resume making outbound sales calls. They resumed outbound calls in January 2023.

Media contacts:

Andrew Park
FMA Media Relations Manager
[email protected]
021 220 6770

Campbell Gibson
FMA Senior Adviser, Media Relations
[email protected]
021 945 323