Retail vs wholesale investors: what’s the difference?Retail vs wholesale investors: what’s the difference?

In a nutshell: most everyday investors are retail investors. Some people or organisations qualify as wholesale investors because the law treats them as having enough investing experience, scale, or access to advice to assess certain offers with fewer protections.

This matters because some offers are only made to wholesale investors. When that happens, Sharesies can’t make the offer available to everyone—even when lots of customers are interested.

Let’s unpack what the difference means.

First up, what’s a retail investor?

A retail investor is an investor who, under New Zealand law, is entitled to the full range of disclosure requirements and investor protections available under the Financial Markets Conduct Act 2013.

In New Zealand, you’re generally a retail investor for an offer unless you qualify as a wholesale investor for that offer or service.

Being a retail investor doesn’t mean you’re new to investing, or that you don’t know what you’re doing. It just means you get the standard protections that usually apply when investment opportunities are offered to the public.

For example, a retail investment offer will often need a product disclosure statement—referred to as a PDS. A PDS is designed to support due diligence, and gives a prudent but non-expert investor key information to help decide whether to invest. 

What kind of offers can retail investors take part in?

Retail investors may be able to take part in corporate actions like share purchase plans, rights offers, and initial public offerings (IPOs).

Sometimes, an offer might still have extra eligibility rules. For example, you may need to be an existing shareholder on a certain date, live in a particular country, or meet the offer’s minimum or maximum investment amount.

So, what’s a wholesale investor?

A wholesale investor is a person or organisation that the law treats as able to assess some offers without the same level of information and protection retail investors usually get.

There are a few ways someone may qualify. For example, they might be:

• an investment business, like a bank, fund manager, insurer, or financial adviser

• an experienced investor who owns or has invested more than $1 million of investments

• a large investor, generally with more than $5 million in net assets or turnover

• a government agency

• investing at least $750,000 in a particular investing opportunity

• an eligible investor for a particular investing opportunity (see the next section).

Some people or organisations qualify as wholesale investors for all offers, but others might only qualify for specific offers.

What’s an eligible investor?

An eligible investor is one way someone may qualify as a wholesale investor for a particular offer.

This can matter when an offer is only available to wholesale investors. If someone doesn’t automatically qualify as a wholesale investor—like an investment business or large investor—you may be able to certify as an eligible investor if you have enough relevant investing experience. 

To qualify as an eligible investor, you need to confirm in writing that you understand the offer, including its risks, value, and what information you need to make a decision. A financial adviser, qualified statutory accountant, or lawyer also needs to confirm your certification. This isn’t just a formality. Becoming an eligible investor means giving up some of the protections you’d usually have as a retail investor.

What’s the difference between retail and wholesale offers?

The biggest difference is usually disclosure and investor protections.

Retail offers

Generally, a retail offer needs to meet disclosure requirements in the country in which you (the investor) is based. 

For example, under New Zealand law, this often means there’s a PDS, more prescribed information, and certain rules around how the offer is made. These protections are designed for investors who may not be experts.  

If the offer is from another jurisdiction, the offer must still comply with New Zealand legal requirements to be offered to a retail investor in New Zealand. Exemptions or compliance regimes often allow overseas offers to be made without full compliance with New Zealand legal requirements.

Wholesale offers

A wholesale offer may not have the same disclosure requirements as a retail offer. Under the FMCA, an offer to a wholesale investor does not require disclosure under Part 3 of the Act.

That can make wholesale offers (whether from New Zealand or overseas) faster or simpler for companies and fund managers to run—but it also means investors may get less information and fewer protections.

As highlighted by the FMA, if you invest in a wholesale offer, you may not receive a PDS, may not be dealing with an FMA-licensed firm, and may not have access to a free independent dispute resolution scheme.

Wholesale offers still need to follow fair dealing rules. This means, for example, the person making the offer can’t engage in misleading or deceptive conduct, make false or misleading statements, or make unsubstantiated claims.

For example

Let’s look at how this can play out with different types of offer.

Example 1: an IPO for an NZX company

A company wants to list on the NZX and raise money by offering shares to the public. The company will prepare a PDS under NZ law and NZ retail investors (and wholesale investors) will be able to apply.

Offers like this are generally available via Sharesies.

Example 2: an IPO for an ASX company

A company wants to list on the ASX and raise money by offering shares to the public. The company will prepare the Australian equivalent of a PDS (a ‘prospectus’). Having a prospectus in place means that Australia-based retail investors may apply, but does not necessarily mean that NZ retail investors can apply. 

For NZ retail investors to be included, the IPO offer needs to meet additional New Zealand requirements. There’s a ‘mutual recognition’ arrangement between Australia and New Zealand that can make this easier—it allows qualifying Australian offers to be accepted in New Zealand without the company having to produce a separate NZ disclosure document. But this mutual recognition isn’t automatic—the company must meet the relevant criteria.

If Sharesies is satisfied those requirements are met, offers like this may be made available to all NZ retail investors via Sharesies.

Example 3: an IPO for a US company

If a company wants to list on a US exchange and raise money by offering shares to the public, generally they’ll need to comply with US requirements.  However these requirements don't satisfy New Zealand's rules for retail investors, and there is no equivalent of the Australia–New Zealand mutual recognition arrangement for the US.

This means that, unless the company separately meets New Zealand's retail investor requirements (which is uncommon for US-listed companies) or Australian requirements (and relies on the mutual recognition regime), NZ retail investors cannot apply for shares in the IPO.  

However, even if the retail disclosure requirements are not met, Sharesies may still be able to distribute this offer to New Zealand wholesale investors.

Example 4: A share purchase plan or rights offer for existing shareholders

A listed company wants to raise more capital, so it offers eligible existing shareholders the chance to buy more shares through a share purchase plan or a rights offer. 

For NZX-listed companies raising capital by issuing new shares, there’s an exemption that removes the need for a full PDS. Instead, the company provides what's called a ‘cleansing notice’ to the market—a formal statement confirming that investors already have access to all the material information they need to make a decision (because the company is listed on the NZX and subject to continuous disclosure obligations). 

Offers like this may be made available to eligible NZ retail investors via Sharesies. However, to participate, you'll typically need to be an existing shareholder as at a specified ‘record date’, and meet any other eligibility criteria set by the company.

Other exemptions are also available which may allow ASX-listed companies to make offers to existing NZ retail shareholders. 

Offers like this may be made available to eligible NZ retail investors via Sharesies.

Example 5: a wholesale fund or private investment offer

Some managed funds, property syndicates, private credit investments, venture capital opportunities, or private company offers may only be available to wholesale investors.

In addition to having less prescribed disclosure than retail offers, they may also be harder to compare with listed investments or retail managed funds.

However, Sharesies may still be able to distribute this type of offer to New Zealand wholesale investors.

Are wholesale offers better than retail offers?

Not necessarily.

A wholesale offer might seem attractive because it’s exclusive, early, or not widely available. But fewer retail protections can also mean you have to do more of the work yourself.

Before taking part in any investment offer, it’s worth asking:

• What am I investing in?

• How could this investment make money?

• How could it lose money?

• What information have I been given?

• Is that information enough?

• What protections would I have if something goes wrong?

• How does this fit with my wider portfolio?

And if you’re thinking about certifying as an eligible investor, it’s worth getting independent professional advice first.

The main takeaway

Sharesies wants investing to be as accessible as possible—but some offers are legally restricted to certain investor types, or have terms that limit who can access them. If an offer isn't available to you, often it's not a choice we've made—it's a reflection of the rules and protections that exist for different kinds of investors.