FMA orders Kalkine to cease making outgoing sales calls to New Zealanders
New Zealand’s Financial Markets Authority (FMA) 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 regulator found the content of those sales calls concerning. In particular, they contained representations made by Kalkine which were likely to mislead prospective clients generally in relation to Kalkine’s advice service. The content also overstated the performance characteristics of its service and of certain financial products referred to during sales calls (i.e. listed stocks).
The calls were likely to mislead clients in relation to Kalkine’s primary place of operations; and 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.
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 regulator noted that Kalkine had engaged constructively with the FMA throughout the regulator’s inquiries.