Two advisers investigated

It has released its investigations and enforcement key themes report for the year ended June 30.

It said the key issues in most cases related to governance, culture and conflicted conduct.

The report highlights the FMA’s wider range of regulatory responses to poor compliance and misconduct.

More than three-quarters of its completed investigations resulted in sanctions that did not involve court.

It used responses including enforceable undertakings, interventions such as third-party reviews, sanctions, warnings and directions and directing the Registrar to remove companies from the FSPR.

FMA secured $51.14 million in compensation for investors over the period and $1.71 million was awarded in penalties and fines.

The FMA was involved in 51 investigations and 28 litigation matters. Of the 28, six resulted in court judgements, 12 are in court, two were settled, one was withdrawn and the remainder were resolved before proceedings were filed.

Finance companies made up the bulk of litigation matters, at 28%, and primary markets including offer disclosure, unlawful offers and compliance with management bans comprised 39% of investigations.

The financial adviser and FSPR regime made up 14% of litigation matters in the year and 15% of inquiries and investigations.

The FMA conducted one inquiry considering whether the impact of a vertically-integrated business structure was increasing the risk that investors might not receive appropriate advice.

The FMA said when the adviser, investment manager and provider of research information were connected it was important for advisers to test the investment information and consider whether products were suitable for a client.

“Although we do not oppose vertically-integrated business structures, robust processes must be used to ensure customers’ interests are protected and put ahead of the profit-making interests of the providers involved. Although no action was taken in this particular case, distribution channels need to be carefully monitored and managed. Advisers in vertically-integrated structures play a key role. It is important that advisers are able and willing to question the information given by the provider and manager, and always put their customers’ interests first.”

FMA was unable to give any further information about the two cases it said were being investigated as potential referrals to the FADC, the body that considers advisers’ breaches of the Code of Conduct.

Comments from our readers

On 28 August 2015 at 9:30 pm I was wondering said:

Perhaps we're finally going to see a bank adviser and his/her employers facing the music?
If it is, it's been a long time coming.
I'm looking forward to the full details coming out . It didn't take long for previous prosecutions to be leaked. Exciting times.

On 2 September 2015 at 4:22 pm Comprehensive Planner said:

I find it very interesting that by far the majority of the FMA's investigations and Enforcements involved product providers and company directors as opposed to AFAs and the two that were referred to in the report, were not shown on the timeline so we don't know how long ago this happened or didn't happen as the case may be. It does beg the question of why AFAs face such a cost impost around legs. and regs.

It is also interesting that the FMA when referring to vertically integrated distribution models avoids mentioning many of the QFEs which to me are as close to being vertically integrated as you can get.

This report seems to vindicate much of what was said during the development of the legislation...not many financial advisers are crooks, but beware Directors and Product companies.

Two advisers investigated

FMA began investigations into two potential referrals to the Financial Advisers Disciplinary Committee in the past year.

Friday, August 28th 2015, 12:47PM 2 Comments

Comments from our readers

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