New Zealand’s Financial Markets Authority (FMA) has filed civil proceedings against Booster Investment Management Limited (BIML), a wholly owned subsidiary of Booster Financial Services Limited.

The proceedings allege breaches of the Financial Markets Conduct Act (FMCA) by BIML and the following directors and senior managers of BIML: Allan Yeo (director), Paul Foley (director), Brendon Doyle (former director), David Beattie (senior manager) and Nicholas Craven (senior manager).

The FMA proceedings allege that multiple breaches occurred through 2017-2022, arising from investments made by BIML into a related, limited partnership, the Booster Tahi Limited Partnership (Tahi), which in turn invested into a series of domestic wine businesses, later amalgamated into the Booster Wine Group (BWG). The investors referred to in this case are retail investors and the funds involved come from three Booster Schemes (the Booster KiwiSaver Scheme, Booster Super Scheme and Booster Investment Scheme, (the Schemes)). Booster has advised that as at 31 May 2024, 24 of the 61 retail funds Booster manages have exposure to BWG, including six KiwiSaver Funds. Those Funds’ exposure ranges from 0.77% to 3.83%.

The FMA alleges 75 causes of action that:

• BIML breached its duties and obligations as the manager of the Schemes when investing in the manner described above;
• the individuals involved used their positions improperly as directors or senior managers, in circumstances where conflicts of interest and related party benefits were not properly managed, when making investments of Scheme funds to benefit Tahi and the BWG; and
• failures to follow required processes meant that the relevant transactions were made in breach of the prohibition against related party transactions.

The FMA alleges the relevant Tahi investments were made without any consideration by the BIML Investment Committee:

• where the specific circumstances of an investment suggest that it was not in the best interests of Scheme participants. These circumstances include the concerns of BWG’s lenders (that were known to BIML), the purpose of advances, and the underperformance of the BWG;
• where the specific investment was not made in accordance with Tahi’s investment criteria (which BIML was obliged to monitor);
• the size and timing of particular requests for funding, and the timeframe for responses; and where there were material changes in the underlying business or the broader circumstances of that underlying business, without any reassessment of the appropriateness of the ongoing investment.

The FMA will be seeking declarations of contravention, pecuniary penalties to be paid to the Crown, and an inquiry into damages.

The FMA’s regulatory delivery team has increased engagement with BIML to ensure it is satisfied with aspects of BIML’s governance and operations, with a focus on its direct investment activities. Booster is cooperating with the FMA’s supervisory team. This work will continue in parallel with the proceedings and is focused on current and future compliance and investor outcomes.