After receiving more than 2,000 complaints since July 2014, the Financial Markets Authority (FMA) is warning investors to step inside the regulatory tent for their own protection.
New Zealand’s Financial Markets Authority (FMA), the country’s main watchdog organization, has stepped up its call to bring in investors within its regulatory mantle, given the staunch uptick in complaints over the past few years – climbing to over 2,000 since mid 2014.
Like many other regulatory jurisdictions such as the UK, Australia, and continental Europe, New Zealand has had a large number of complaints in relation to scams from unregistered or unlicensed companies, some of which are operating offshore. The past few years have seen NZ step up its enforcement with the launch of Phase 1 and Phase 2 of its regulatory regime in a bid to better police its domestic financial services industry – by and large this has yielded a large number of gains though gaps in its coverage still exist.
FX Underscoring Regulatory Vulnerabilities
The main culprits presently have tended to gravitate towards such products as foreign exchange (FX) services and training software and property seminars, among others. The FMA has remained committed to weeding out firms that have no license or authorization to operate in NZ, which is now required by law. One of the areas that still presents vulnerabilities to this regime however is the propensity of offshore firms operating outside the FMA’s jurisdiction, as the regulator cannot help individuals recoup lost funds or take legal action – yet another reminder to deal with local or authorized firms.
Liam Mason, Director of Regulation, FMA
Overwhelmingly, the FMA’s response to this existential threat has been to alert the public when it is concerned with an individual or business by issuing warnings on their website and, in select instances, recommending against investing with these companies. This process is ongoing however, and individual investors are best served by exercising good judgment in choosing a financial service provider.
According to Liam Mason, the FMA’s Director of Regulation, in a recent statement on the directive: “The Financial Markets Conduct Act has determined what products are regulated and it has strengthened the powers we have over the providers’ conduct. Unfortunately we recognise there will always be businesses that deliberately set up outside our jurisdiction and still manage to entice New Zealand investors to use their services.”
“For example Forex trading is considered a high risk, complicated investment and so we recommend consumers protect themselves as much as possible when contemplating this – or indeed any – investment. Do some research and take advantage of the Financial Markets Conduct Act and the protections it offers the investor,” noted Mason.
