FMA opens second case under FSP Act charges

FMA enforcement head Karen Chang has warned it will target directors of companies that abuse the register.

The Financial Markets Authority (FMA) has brought its second case for breaches of the Financial Service Providers Act against a company, as part of a wider bid to crack down on businesses abusing the act.

The FMA alleges the company, which it hasn’t named, advertised its Financial Service Providers Register (FSPR) registration on its website after it had been deregistered.

After FMA warnings were ignored, the company and its New Zealand-based director have been charged with two counts and one count respectively of breaching the FSPA.

The charges have been filed at the Wellington District Court.

Each charge carries a maximum fine of $300,000 for a company and a $100,000 fine and/or a one-year prison sentence for an individual.

“Last year we warned directors who encouraged or facilitated abuse of the FSPR that we would be stepping up enforcement action. We are now taking that action,” says FMA enforcement head Karen Chang.

The regulator filed its first charges under the FSPA in February in a similar case of a company falsely advertising its FSPR registration on its website. The company's New Zealand-based director was granted interim name suppression by the North Shore District Court in April.

Since 2014, the FMA has had the power to direct the Registrar of Companies to deregister a company from the FSPR where the registration is likely to create a false or misleading impression that the company provides financial services in New Zealand, that it is regulated in New Zealand, or the company’s registration otherwise damages the integrity or reputation of New Zealand’s financial markets.

The register, which is a simple list of financial businesses, is frequently hijacked by online forex traders seeking to imply they are regulated in New Zealand. Although efforts had been made to stop overseas companies from using the register, many have used patsy New Zealand nominee directors, and some are linked to a company service provider which has dozens of directorships.

A September FMA report on the FSPR signalled its intention to target directors who are encouraging or facilitating abuse of the register.

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