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FMA censures Jarden Securities for DI license violations



The New Zealand Financial Markets Authority (FMA) has censured Jarden Securities Limited for breaches done by OM Financial Limited (OMF) as a licensed derivatives issuer (DI).

Before Jarden bough OMF, the company co-mingled derivative investor money with its own, which is a violation of its DI obligations. Since the acquisition, Jarden has inherited OMF’s licence, rights and obligation and such has also received the censures.

DI licensees are obligated to hold investor money separate from their own money to ensure protection for their clients.

James Greig, FMA Director of Supervision, said:

A derivatives issuer failing to handle client money appropriately is serious and we have previously signaled our concerns around this issue in our 2020 DI Sector Risk Assessment report. We have little tolerance for firms not meeting their obligations in this area.

According to the FMA, the breaches occurred between September 2015 and July 2020. Jarden, formerly NZ Capital Securities, acquired OMF in 2019. The company self-reported to regulator in September 2020.

During the period of the violations, the FMA found that OMF transferred its own money into the trust account meant to hold derivative investor money which included 150 payments, a total of $1million. Derivatives issuers are allowed to deposit their own money in the trust account to protect the funds against the risk of a shortfall. However, the FMA determined that the deposit made by OMF was actually business-related payments to third party providers.

James Greig, added:

James Greig, FMA
James Greig
Source: LinkedIn

Although no OMF clients lost money as a result of this issue, we considered that investor money was at risk while the necessary separation processes were not in place. The breaches warranted a public censure due to the significant period over which they occurred, as well as the value and number of transactions.

While we acknowledge that OMF self-reported these issues to us, managing client money in accordance with the regulations is a fundamental, minimum requirement for any licensed derivatives firm. In these circumstances, the self-reporting of the issues is expected and does not prevent the FMA from taking action and using our regulatory tools to hold firms to account. Jarden has engaged constructively with the FMA through this process and implemented changes to ensure this issue doesn’t happen again.

The regulator noted that Jarden has been working with the former OMF teams to align the processes with the group’s practices.

The FMA recently published new guidance on how firms should advertise financial products.

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FMA censures Jarden Securities for DI license violations

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