FMA to target the big boys

The Financial Markets Authority has published its enforcement policy, which shows where its funds are likely to be spent.

Chairman Simon Allen says publication of the policy marks a milestone within FMA’s first six months as New Zealand’s fully-fledged financial services law enforcement body.

“Promoting and facilitating the development of open, efficient and transparent markets is FMA’s main objective under our governing legislation.

“By publicising our enforcement policy we are deliberately seeking visibility and hope to assist participants in meeting their compliance obligations.

“That is why we also fully intend to publicise our enforcement action unless there are legal or other compelling reasons not to. The open scrutiny will serve as a powerful and educative deterrent,” Mr Allen says.

He says four principles underpin the enforcement policy:

· FMA will use the full “regulatory toolbox,” including bringing criminal prosecutions for serious misconduct; taking action on investors’ behalf; and requiring market participants to provide financial compensation for losses due to unlawful conduct.

· Decisions about allocating FMA’s resources will be prioritised, focusing on cases involving large numbers of investors at risk of significant or potential loss, where there is evidence of intentional unlawful behaviour, and where there is a need to send a clear regulatory signal to the markets.

· All financial market participants need to have clear and well-understood responsibilities. FMA is committed to an open and educative approach about its role, functions and policies so participants can achieve best practice standards of compliance.

· Where necessary, FMA will use its powers to bring test cases that will clarify “grey areas” of the law.

However, a case might be set aside where:

· Enforcement would not be justified in the public interest;

· There are opportunities for more effective intervention – such as referral to the Serious Fraud Office;

· The breach is a one-off, isolated case, or involves minor events relating to technical error or similar issues;

· The breach can be better resolved directly by disputes resolution schemes or by contract between private parties.

“FMA will focus its energy not across every act of misbehaviour or insignificant breach but primarily on those areas of misconduct where the failings or breaches are intentional or reckless or involve other serious unlawful conduct, and where the perpetrator set out to intentionally mislead or deceive innocent investors or third parties,” Mr Allen says.

He says FMA will not pursue litigation where the dispute is essentially private in nature as this would not be an appropriate use of public money.