New Zealand’s authorities seek to tackle misuse of Financial Service Providers Register

It has been nearly two months since New Zealand’s Financial Markets Authority (FMA) voiced its concerns over the growing number of complaints it receives over Forex companies that are registered in the Financial Service Providers Register (FSPR).

It seems that the FMA was not the single regulatory body in New Zealand to be concerned over this trend, as the Ministry of Business, Innovation and Employment (MBIE) last week published “Options Paper. Review of the Financial Advisers Act 2008 and Financial Service Providers (Registration and Dispute Resolution) Act 2008”, with the document seeking to address misuse of the Financial Service Providers Register.

The MBIE is concerned that some offshore-controlled firms have sought to register on the FSPR in order to take advantage of New Zealand’s reputation as a well-regulated jurisdiction. These firms then misrepresent that they are licensed or actively regulated in New Zealand.

The Options to change the law are the following:

Option 1: Include stronger registration requirements

Stricter requirements would be imposed prior to registration. For instance, companies may be required to confirm and provide proof that they are licensed and/or supervised in their home jurisdiction and in any jurisdiction that they are proposing to provide services to.

Option 2: Amend the grounds for de-registration

The law may provide additional circumstances under which the FMA may direct the Registrar to decline a registration or de-register an entity. The grounds could include where an entity does not provide a substantive amount of services from a place of business in New Zealand, or are a ‘repeat offender’ that has previously been de-registered.

Option 3: Amend the territorial scope of the legislation to require a legitimate connection to New Zealand

The requirement to register will apply only to entities with a stronger connection to New Zealand than is currently the case. Instead of simply requiring a place of business in New Zealand, the legislation could apply either to entities that are providing services to clients in New Zealand, or to entities carrying on business of providing a financial service in New Zealand.

Option 4: Require trust and company service providers to register

Regulations would be implemented to prescribe trust and company service providers subject to Anti-Money Laundering legislation as financial service providers required to register on the FSPR. The services of trust and company service providers can include acting as a director or nominee shareholder in order to provide anonymous registration for offshore interests.

Option 5: Limit public access to all or parts of the FSP Register

Under this option, certain parts of the FSPR would be available only to regulators and policy-makers. The non-public parts could cover businesses that are not licensed or those not proposing to provide retail services in New Zealand.

Option 6: Convert the current FSP Register into a non-public notification list

The current register would become a non-public notification list. Legislative change would be made so that entities that are currently required to register would instead be required to notify a government agency of their intention to provide financial services. The agency would maintain a non-public list of notifications received. If necessary, a separate publicly-accessible register could be established to offer information for consumers. The public register could contain information of only those entities that provide financial services to New Zealand retail consumers.

Feedback on the proposals is expected by January 29, 2016.

You can view the full document from the MBIE by clicking here.

Read Also: