Auckland, 12 July 2025 — In a move that has left devastated investors reeling, the Financial Markets Authority (FMA) has succeeded in striking out a legal claim brought by Lindeman Investment Ltd on behalf of Du Val Mortgage Fund investors—without even allowing the matter to proceed to trial. The High Court’s decision, delivered yesterday, means dozens of New Zealanders who lost their life savings may now never get the chance to have their story heard in court.

For the investors caught up in the saga, the case wasn’t just about recouping funds—it was about accountability, transparency, and being treated fairly under the law. Instead, the court determined that the FMA owes no duty of care to those investors—even in situations where the regulator had been actively involved behind the scenes and made key decisions just weeks before the collapse of the investment structure.

No Trial. No Defence. No Voice.

The court struck out the case before a trial could begin. The FMA, rather than filing a defence to the allegations, applied for multiple extensions of time and ultimately sought to have the case dismissed entirely—without confronting the claims in open court.

Those claims centered on what Lindeman described as the FMA’s “effective approval” of an equity restructure that converted investors’ debt holdings into shares. Just one month after indicating satisfaction with the disclosures made to investors, the FMA applied to place the Du Val group into receivership, and shortly thereafter, statutory management.

Shareholders argue this timeline shows the FMA had serious concerns about the solvency of the group and the legality of marketing practices but failed to warn investors in time—despite its public mandate to promote fair, transparent markets and protect investor confidence.

A Regulator’s Duty: To Whom, If Not the Investors?

The core issue at the heart of this case is not the solvency of Du Val, which is now under statutory management, but the role and responsibility of the regulator.

The FMA is tasked with ensuring financial markets function fairly and transparently. Yet, in this case, despite investigating and engaging with Du Val over many months, issuing public warnings in 2023, and eventually applying to place the group into receivership, the FMA is now held to owe no legal duty of care to the very investors it is meant to protect.

This has left investors asking: if the FMA does not owe a duty to investors who raised concerns, then who exactly does it owe a duty to?

Wholesale Loopholes, Real-World Consequences

At the center of the case lies New Zealand’s wholesale investor regime. Investors in the Du Val Mortgage Fund were considered “wholesale” under legal definitions—despite many being ordinary individuals who believed they were investing in secure property-backed assets.

This status meant they were excluded from key investor protections like product disclosure requirements, audited financials, and licensed supervision. It is now clear those gaps had catastrophic consequences.

Investors argue the FMA allowed fund managers to rely on these exemptions, despite clear signs that the structure may not have been appropriate for the investors involved. This is not an isolated case—other failed wholesale schemes like Black Robin have exposed the same vulnerabilities.

Comfort Given, Then the Plug Pulled

In May and June 2024, the FMA reviewed and ultimately accepted revised disclosures made to investors. On 2 July 2024, it wrote to Du Val confirming that it would not be issuing a direction order or making any public statement. That appeared to provide reassurance to investors.

Yet, just one month later, the FMA changed course—applying to the High Court to place the group into receivership.

Investors say they should have been warned when the regulator knew more than it disclosed. Had a clear warning been issued, many believe they might have avoided becoming shareholders, or could have taken steps to reverse the transaction. Now, they are left holding shares that, under statutory management, have no liquidity and uncertain value.

The Cost of Caution: Justice Deferred, Lives Shattered

Justice Blanchard, in his 42-page decision, accepted the FMA’s argument that imposing a duty could lead to “indeterminate liability” and inhibit the regulator’s willingness to intervene in the future. Yet, for the people who lost everything, the chilling effect is already real—they have been left with no path to recourse.

The Court acknowledged the human consequences but ruled the legal relationship between the FMA and the investors lacked sufficient “proximity” to impose a duty. The implication? A regulator can be aware of risks, engage deeply behind the scenes, but still bear no liability to those harmed by inaction or delay.

“The FMA gets to carry on, while we carry the burden,” one investor said. “We weren’t even allowed a trial. Not even one day to be heard.”

Time for Reform

This outcome should be a wake-up call. The wholesale investor exemption regime is failing to protect real people, and the FMA must be held to a higher standard of transparency and responsiveness—especially where investor livelihoods are at stake.

If the law permits regulators to sidestep responsibility while hundreds suffer irreversible loss, then it’s not just investors who’ve been let down—it’s the promise of justice itself.