Enforcement by the Financial Regulators in May 2015

Home Insights Enforcement by the Financial Regulators in May 2015

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Contributed by: Polly Pope and Emma Rae

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Published on: June 04, 2015


Points of interest this month

Issues paper released for review of financial advisers' legislation

MBIE has released its Issues Paper for the review of the Financial Advisers Act 2008 and the Financial Service Providers (Registration and Dispute Resolution) Act 2008. Following on from the terms of reference that were released earlier this year (and were discussed in more detail in a previous edition of this newsletter), the Issues Paper outlines MBIE's analysis of the role of financial advice, registration and dispute resolution as well as the aims and role of government regulation in this area.

The paper contains a number of questions designed to promote discussion and understanding of the key issues and opportunities for change, but does not propose any solutions or legislative changes. MBIE is currently proposing to develop policy options for a second consultation document to be released toward the end of this year.

In terms of enforcement implications, we have previously noted that the dispute resolution scheme for financial service providers will be squarely within the scope of the review. The issues paper clarifies that MBIE will be considering the extent to which this scheme allows consumers to be aware of, confident in, and able to access dispute resolution for financial service issues, and whether changes might be required to better achieve those objectives. For example, MBIE is interested in examining whether the right types of providers are subject to dispute resolution schemes, what jurisdictional limits apply, and will also consider the regulatory framework and tools for monitoring these schemes.

Enforcement issues are also likely to be relevant to the review of the registration system for financial service providers, with MBIE indicating it is interested in whether the FMA needs any other tools or powers to help it encourage compliance with registration requirements and to avoid misuse of the register.

MBIE is seeking submissions on the questions raised in its issues paper, as well as any other relevant issues, by 5pm on 22 July 2015. The issues paper is available here.

NZX reviews penalty powers

In related news, NZX is reviewing the penalty provisions available to the NZ Markets Disciplinary Tribunal in cases of regulatory breaches.

The review is aiming to consider whether the Tribunal has been imposing appropriate penalties for breaches of NZX's rules, and to ensure that the Tribunal's rules and procedures enable appropriate penalties to be imposed and provide guidance on the application of penalties. In particular, the review will consider whether a penalty regime should be implemented to impose personal liability on directors and officers for issuer breaches.

For a more detailed discussion of the NZX review, see the recent Corporate Advisory Legal Update, which can be found here.

FMA obtains freezing orders and appoints receivers as part of investigation into Arena Capital

The FMA has taken a number of interim steps as part of its investigation into Arena Capital Limited (trading as BlackfortFX) for suspected breaches of financial markets legislation. 

Limited information is available about the investigation itself, although the FMA has indicated that it is working with the Serious Fraud Office and will provide further information in due course. However, the FMA has taken active steps to seek to preserve investor funds pending the outcome of that investigation, including successfully obtaining asset preservation orders in mid-May in light of concerns that investor funds were potentially at risk. 

The FMA subsequently applied for receivers and managers to be appointed to manage the business and to identify the assets held, the names of clients and the value of any investments held in Arena/Blackfort, and that application was granted by the High Court on 27 May.

Further information on the investigation and the interim steps taken is available here and here.

FMA removes entities from New Zealand register of financial services providers

The FMA has exercised its power to direct the Registrar of Companies to remove a number of offshore firms from the Financial Services Provider Register, bringing the total number of entities that have been removed from the register to 23 this year. The FMA has also taken steps to prevent a further 20 firms from completing the registration process.

The FMA can exercise its power to direct de-registration where it is likely that companies are giving a false or misleading impression about the extent to which they are regulated in New Zealand, and is designed to prevent (among other things) offshore companies from registering primarily to take advantage of New Zealand's regulatory reputation when the substantive business takes place in a different country.

The FMA's media release describing the de-registrations can be found here.

NZX signs Memorandum of Understanding with Takeovers Panel

NZX and the Takeovers Panel have become the latest regulatory entities to seek to build a closer working relationship, entering into a Memorandum of Understanding in May to encourage greater co-operation and information sharing between the two agencies.

The MOU sets out a framework for engagement and co-operation, which recognises the role of NZX as the regulator of issues and participants operating on its licensed markets, as well as the role of the Takeovers Panel in providing oversight of transactions regulated by the Takeovers Code where the affected companies may be participating in New Zealand's securities markets.

The MoU can be found here, and the NZX's related media announcement can be found here.


Changes, consultations and new projects

Amendment regulations introduced

Three sets of regulations were introduced in May to amend various financial regulatory instruments, and will come into force on 6 June 2015 as follows:

  • The Financial Service Providers (Exemptions) Amendment Regulations 2015 amend the Financial Service Providers (Exemptions) Regulations 2010 to give certain exemptions from the application of the Financial Service Providers (Registration and Dispute Resolution) Act 2008.
  • The Credit Contracts and Consumer Finance (Infringement Offences) Regulations 2015 prescribe the infringement fee for an infringement offence under the Credit Contracts and Consumer Finance Act 2003.  These regulations set the infringement fee at $1,000 for disclosure, information and various other offences under s 102 of the Credit Contracts and Consumer Finance Act 2003.
  • The Credit Contracts and Consumer Finance Amendment Regulations (No 2) 2015 amend the Credit Contracts and Consumer Finance Regulations 2004 in order to prescribe the circumstances in which section 26A of the Credit Contracts and Consumer Finance Act 2003 does not apply.  


This publication is intended only to provide a summary of the subject covered. It does not purport to be comprehensive or to provide legal advice. No person should act in reliance on any statement contained in this publication without first obtaining specific professional advice.

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