by Susan Edmunds
Ross Pennington, a partner at Chapman Tripp, said the high level of enforcement activity seen by the regulator over the past month was likely to become the new normal.
As well as the $1.5 million settlement with Milford, two directors of Apple Fields were fined, 23 firms forex firms removed from the FSPR, asset preservation orders were obtained over Arena Capital and a $500,000 compensation payment was secured from Pacific Edge for breaching continuous disclosure provisions of the NZX listing rules.
Pennington said it was a function of the increasingly regulated market, which now has several layers of legislation, many of which were difficult to comply with and required a lot of constant work.
The industry was now dealing with about 20 times the level of regulation than it had previously. He said the FMA had about three times the staff the Securities Commission had at its zenith and many dedicated to enforcement.
As well as the investigations that made headlines, Pennington said there were many more going on in the background that were not reported.
Coming under the FMA’s scrutiny was potentially very damaging to a firm’s reputation, he said. “It’s so hugely damaging when you get a call out of the blue saying ‘we think you’ve stuffed up’… the worst thing is what it does to your brand in direct and indirect ways.”
He said Milford would be suffering significantly as a result of the investigation.
While other countries were used to much more frequent investigations, it was still new to New Zealanders. “There’s been a relatively immature response so far, saying ‘give back your INFINZ awards’… slinging as much dirt as they can.”
Pennington said the FMA had already changed the way it dealt with fund managers before the Milford investigation started. “Milford drew the short straw of being the first and most prominent result but they cannot and will not be the last.”
A high level of expectations and a low level of practical realism from the FMA would contribute to regulatory hurdles that were very hard for practitioners to jump, he said.
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