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Screenshot of a breaking news alert e-mail from Q2 2017
New Zealand’s Financial Markets Authority (FMA) published its first Conduct Outcomes Report 2016. It highlights the key issues and actions from the FMA’s enforcement, supervision and preventative activities for the financial year July 2015 to June 2016.
Previously published as the Investigations and Enforcement Report, this report shows how the FMA has made use of the broad range of conduct regulation powers available under the Financial Markets Conduct Act 2013.
Key actions and outcomes during the period
- 70% of completed investigations resulted in sanctions other than court action
- 28 firms were removed from the Financial Services Providers Register
- Four company directors agreed not to be involved in financial markets for agreed periods of time
- Completed the first court action against individuals based overseas, securing convictions against four directors charged with criminal offences under the Securities Act 1978 for making untrue statements.
Nick Kynoch, FMA, General Counsel, said:
The Conduct Outcomes Report demonstrated that the FMA maintains a credible enforcement and litigation function which it is fully prepared to utilise. However we have a wide range of regulatory tools available and litigation may not always be the most effective, or proportionate way, to deal with conduct and compliance issues.The FMA’s early years were dominated by wading through the rubble of the finance company collapses. That work is now done, with the final cases before the courts. We will continue to use court action where this best secures our desired regulatory outcome. Litigation may serve as the best deterrent and the most appropriate sanction, or for getting compensation for victims or clarifying the law. We also have powers to influence conduct and demand compliance where we see the potential for poor outcomes or wrong-doing.
Clarifying FMA’s expectations to the market
In May 2016, the FMA issued a direction order against the foreign exchange educator and trader Cambrian Corporation (Cambrian) for engaging in misleading and deceptive conduct.
This case shows the FMA using a wider range of powers to prevent harm to consumers. Cambrian was ordered to change its marketing materials and website and certify its compliance with the FMA.
Court action for market manipulation
The FMA commenced civil proceedings into market manipulation which was brought to trial in September 2016. This case was brought to demonstrate the FMA’s concern that investors should be confident that all trades are legitimate and reflect genuine supply and demand in secondary markets. The case remains before the court.
Enforcing the law
As both a legal enforcement agency and a conduct regulator, the FMA can also take preventative action through the courts, where there are concerns that investor funds are at risk. In the case of PTT Limited and Blackfort/Arena Capital, the FMA obtained interim asset preservation orders to protect cash and assets on behalf of investors. Where appropriate the FMA works with the Serious Fraud Office to address fraudulent activity.