FMA pouring effort into source of 'very high' number of complaints

Thursday, 21 September 2017

Foreign exchange traders with no New Zealand investors are the most complained about.

The Financial Markets Authority believes it has made a real difference in preventing misuse of the Financial Service Providers Register, the source of more than 1000 complaints.

But while the regulator has ramped up its efforts, so have the companies looking to trade on the country's reputation.

Financial Markets Authority director of regulation Liam Mason says it's worth good money to trade on the country's reputation.

'It's worth good money to be able to trade on New Zealand's reputation,' FMA director of regulation Liam Mason said.

'We think we've made a real difference, but people are trying harder at the same time.

* Second appeal against FSPR deregistration launched**

'It's been a substantial amount of work.'

In 2014, the FMA was given the power to deregister or prevent businesses and people from registering on the FSPR, which is a searchable register of entities offering financial services in New Zealand.

Registration on the FSPR, however, does not mean something is licensed or regulated in New Zealand, which has lead to widespread abuse as people use the country's reputation to target overseas investors.

'It damages New Zealand's business reputation and threatens the legitimacy of New Zealand's financial services firms,' an FMA report released Friday said.

Mason said the FMA had been involved with a substantial amount of work since it had been given the power to actually do something about this abuse.

This included targeting New Zealand directors who encouraged or facilitated the abuse of the FSPR, as all businesses on the register now needed to have a locally-based director.

He said some local directors were providing an administration service at best and warned them the FMA would use its powers to go after local directors abusing the rules.

The FMA had the power to make administrative orders and warnings, or to file criminal charges.

Advertisements for New Zealand directors had begun popping up and it was a growing issue, he said.

'There are certainly directors who have very large numbers of directorships.

'We have very real questions as to whether they're carrying out their directors' duties at all.'

There had been more than 1000 complaints about businesses and people on the FSPR since 2014, which Mason said was 'very high' and the FMA's largest source of complaints.

Most of the complaints related to foreign exchange traders which often had no New Zealand customers.

Of the 93 FSPR applications referred to the FMA, just 19 had been allowed to register.

Three companies had gone as far as appealing the FMA's decision to deregister them from the FSPR, but the court had ruled in the FMA's favour each time.

This gave the FMA 'confidence', Mason said, as it had been found the regulator was 'uniquely placed' to assess whether a registration would or could damage the integrity and reputation of the markets.

'I'd be mad to say, 'no, we won't get any more appeals'.

'The legal action brought by companies challenging deregistration from the FSPR clearly shows the value these businesses place on registration in terms of giving them credibility in the eyes of investors.'