2025 saw a greater focus on regulatory guidance with the Financial Markets Authority (FMA) taking the unusual step of asking the High Court to confirm the FMA’s guidance on eligible investors (a subset of wholesale investors). The FMA brought a “case stated” application with this being only the second time in the FMA’s history that it has sought clarification from the courts in this way.

The decision of the High Court demonstrated a gap between the legislative purpose and plain wording and the FMA’s views as to how eligible investor certificates should work. There is inherent difficulty facing regulators in attempting to give guidance to the industry (which is desirable) while not overstepping the boundaries of the legislative regime. This is especially challenging where the law is novel and where there is no judicial guidance yet available. In 2026 and going forward, we may see regulators sticking more closely to the plain wording and purpose of the legislation they administer.

Background to the case stated proceeding: Thematic review of use of the wholesale investor exclusion

Following an increase in complaints and concerns about wholesalers offers of financial products, the FMA published its Thematic review of use of the wholesale investor exclusion in October 2022. This included its findings on eligible investor certificates, under which investors may qualify as wholesale investors if they certify that they have previous experience in acquiring or disposing of financial products that allows them to assess the merits of the transactions or class of transactions, and to assess their own information needs in relation to the transaction. The certification regime has a confirmation component: a financial adviser, registered valuer, accountant, or lawyer must, having considered the investor’s grounds for certification, confirm that:

• they are satisfied that the investor has been advised of the consequences of the certification; and
• the confirmer has no reason to believe that the certification is incorrect, or that further information or investigation is required as to whether the certification is correct.

In this thematic review, the FMA detailed the market practices it considered undesirable and issued guidance to address them. Relevantly, the FMA commented that it had found:

• the market relying on incomplete eligible investor certificates including some with grounds that were not capable of supporting the matters certified; and
• evidence of non‑compliance with the requirements of the confirmation regime for eligible investor certificates.

The FMA proceeded to issue guidance to address these concerns, including advice to the market that:

• to meet the eligible investor requirements, an offeror must ensure that the prospective investor’s experience is relevant;
• while offerors are not required to independently verify the information provided in an eligible investor certificate, the investor’s stated grounds needed to show a clear link between their prior experience with that financial products and the transaction in question; and
• there must be no reason to believe the investor lacks the experience certified.

This guidance purported to impose a positive obligation on offerors to assess the adequacy of the investor’s previous experience, in light of the certificate, in acquiring or disposing of financial products in a manner that would allow them to assess the merits of the investment and their information needs.

The case stated proceedings: Back to the black letter of the law

In December 2024, the FMA filed a case stated proceeding, seeking clarification from the High Court on the use, confirmation, and acceptance of eligible investor certificates. This proceeding squarely addressed whether the FMA’s previous guidance as to an offeror’s obligations was legally correct.

MinterEllisonRuddWatts acted for two interveners in the case who intervened to provide a view from the industry as to the correct interpretation. The Court did not accept the FMA’s interpretation of the eligible investor provisions in the Financial Markets Conduct Act (FMCA). In short, the Court favoured the interveners’ interpretation and held that offerors can rely on eligible investor certificates unless the certificate is clearly not valid (for example, if the stated grounds do not demonstrate the investor has any relevant experience with acquiring or disposing of financial products). The certificate does not need to set out the investor’s experience in great detail, or explain how that experience enables them to assess the investment. It must simply state the grounds which could support the certification. It is only if an offeror has actual knowledge that the investor lacked the requisite experience that they cannot rely on the certificate.

In reaching its decision, the Court emphasised the role of the confirmer in the eligible investor regime. Where the grounds stated in the certificate are “thin” but not clearly incapable of supporting the certification, the confirmer may seek clarification from the investor. If the confirmer proceeds to confirm the certificate, the offeror is entitled to rely on it.

The Court’s decision was essentially an exercise in statutory interpretation. The Court noted that it was not its role to assess policy matters or adjudications, and if there was a need to ‘re-balance’ the eligible investor regime, this was a matter for Parliament.

The issues with regulatory guidance

The Court’s decision prompts an important discussion on the role of regulatory guidance and the extent of its influence. Regulatory guidance is published without the checks and balances of the legislature and yet can assume the status of de facto law, as regulated entities work to comply with guidance to avoid being on the wrong side of the chief regulator – and yet it may be outside the four corners of the law.

While the Court declined to read in the additional duties argued for by the FMA in the case stated proceeding, the Minister of Commerce and Consumer Affairs has separately warned the FMA that it is the regulatory expectations must be grounded in law. In the annual letter of expectations to the FMA for 2024/25, Minister Bayly said that the FMA must ensure “market participants have a clear understanding of their legal obligations, and the distinction between legal obligations and guidance”, and that regulatory expectations set by the FMA are properly founded in the law.”

Concerns about the status of guidance were also seen in the market reaction when consulted on the FMA’s draft guide on Fair Outcomes for Consumers and Investors. Affected industries voiced concerns as to the legal basis and practical effect of this guide, and in particular questioned whether the draft guide would create new rules or compliance standards. The FMA has then revisited and considered industry feedback and intended to clarify its regulatory approach, explaining how its outcomes-based focus will guide prioritisation and enforcement going forward.

Will regulators adopt a more cautious approach?

Given the Court’s decision on this case stated proceeding, the expectations set by the previous Minister and concerns voiced within the industry, we expect to see regulators take a more circumspect approach to the issue of guidance heading into 2026.