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Screenshot of a breaking news alert e-mail from Q2 2017
The New Zealand Financial Markets Authority (FMA) today confirmed that a number of offshore firms have recently been removed from the Financial Services Provider Register (FSPR). While the Registrar of Companies maintains the FSPR, the FMA has powers to direct the Registrar to remove companies from the FSPR where it is likely that a company is giving a false or misleading impression about the extent to which it is regulated in New Zealand.
This action represents the second purge of offshore companies carried out in New Zealand, the first being at the end of 2012, when the FMA was in its formative stages, and the New Zealand government issued letters to 226 companies listed on the Financial Services Company (FSP) register.
At that particular time, being listed on the FSP register did not equate to regulation, however in order to implement a regulatory structure within New Zealand which could emulate that of other Western nations with well established financial markets economies, firms with no staff or operational facilities in New Zealand were no longer able to register.
The FMA has been reviewing referrals from the Registrar where there are concerns about whether the substantive business activities of a firm require it to be registered on the FSPR in New Zealand.
The FMA has concerns that some offshore companies have registered on the FSPR primarily to take advantage of New Zealand’s reputation as a well-regulated jurisdiction. The FMA has received complaints from offshore investors who have lost their money to forex companies, or other types of service providers operating abroad that are registered on the FSPR.
In the previous purge of offshore firms, New Zealand authorities considered the vast majority to have been small entities from the Asia Pacific region, with no compliance facilities based in New Zealand. Those which failed to respond to a notice issued by the FMA to prove that they had compliance facilities and a registered office in New Zealand were removed from the register. In this current action, the FMA is continuing down this path.
“We are aware of instances where the FSPR is not being used for its intended purpose. This is taking advantage of New Zealand’s good reputation for being a well-regulated jurisdiction and a good place to do business,” said Liam Mason, FMA General Counsel.
So far this year the FMA has removed 23 entities from the register. The FMA has also taken action to prevent a further 20 firms from completing registration on the FSPR.
The FMA is concerned that local registration agents in New Zealand are facilitating the registrations of these entities, including by taking a role as a director and by providing local registered office facilities to these offshore companies. These activities give the appearance of offering a financial service from New Zealand, when in fact the substantive business, where there is any, takes place offshore.
The FMA will look closely at the ability of such directors to carry out their duties under the Companies Act, especially where multiple directorships are held.
There is a statutory process the FMA must follow in using its powers to direct de-registration from the FSPR. This allows firms to respond to the FMA’s concerns and to submit reasons why they should be allowed to remain on the register.
Mr Mason added “the process follows the natural justice principles that are important to our integrity as a regulator. But this process also takes time and we recognise that in some circumstances we need to alert investors to concerns we may have about a particular offshore company.
“Where we receive complaints about investors either being unable to access their funds, or being unable to contact a company who is holding their money, then we are warning people to take extreme caution when dealing with those particular companies,” Mr Mason said.
The FMA may issue warnings where it has received complaints, or has concerns about a firm and the firm has failed to respond adequately to enquiries from the regulator.
For the official announcement from the New Zealand FMA, click here.