Licence a first for city-based firm

Tony Kinzett

The Financial Markets Authority has granted Tauranga-based First Mortgage Managers the first licence issued to a mortgage trust manager under new financial conduct regulations.

First Mortgage Managers is also one of only half-a-dozen managed investment scheme managers to be licensed so far under the new regulatory regime. The changes came about as a result of the Financial Markets Conduct Act 2013, which replaced most of New Zealand's existing financial markets conduct law.

"This is a real milestone for the business and sets the tone for the future," said First Mortgage Managers chief executive Tony Kinzett. "We intend to be a market leader in achieving best business practice in our industry."

The firm is the manager of First Mortgage Trust, established in early 1996 by the city's biggest law firms Sharp Tudhope, Holland Beckett Lawyers and Cooney Lees Morgan, to take over their existing nominee companies, which were used for lending client trust funds. Edmonds Judd in Te Awamutu and Edmonds Marshall in Matamata subsequently added their nominee operations to First Mortgage Trust.

All five law firms remain shareholders in the company, which chairman Peter Washer, a partner at Cooney Lees Morgan, said was New Zealand's largest non-banking mortgage trust. There are half a dozen of the trusts across New Zealand.

"Getting the licence is significant in so far as the FMA changes are all still quite new," said Mr Washer.

First Mortgage Managers said it was on target to have the firm and the trust compliant by the middle of this year, ahead of the December 1, 2016, deadline.

First Mortgage Managers financial controller Roger Ford said mortgage trusts such as First Mortgage Trust were set up at a time when a number of law firms had concluded that managing their nominee companies was not their core business.

The business has about 300 client loans out and about 2500 investors, with a fund size of about $280 million. First Mortgage Trust pooled funds primarily sourced from the law firm shareholders' clients, lending them out on a first mortgage-only basis secured against retail, residential and commercial properties. The trust and its managers focus on the market for non-banking property lending, typically lending at about 2 per cent above bank rates.

"By investing in the trust, our clients can invest in the property market without exposing themselves to the risks of a particular property because the funds are pooled and spread over multiple properties," said Mr Ford.

As the property market has begun to stabilise and grow post the global financial crisis, First Mortgage Managers was now looking to widen its funds base beyond the law firms' clients and market directly to potential investors, he said.

The facts

Under the Financial Markets Conduct Act 2013, managed investment scheme managers have from December 1 last year until December 1, 2016, to become fully compliant under the new regulations. Becoming a licensed manager is a key requirement. Managers also need to move from the previous prospectus and investment statement regime, to an online product disclosure statement regime, and amend their documentation to comply with the act's governance requirements.