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Companies dodging regulation a headache for FMA

The Financial Markets Authority wants advisers’ help to tackle the problem of New Zealanders getting ripped off by unregulated investment offers.

Wednesday, April 13th 2016, 6:00AM 1 Comment

by Susan Edmunds

It says it has received more than 2000 complaints since mid-2014 relating to investments that fall outside New Zealand’s financial regulations.

The proportion of complaints relating to such schemes is increasing quickly.

Director of regulation Liam Mason said investors did not realise the consequences of investing in products that were not regulated.

More than half of all complaints received were related to scams, or money being lost to – or withheld by – unregistered or unlicensed companies.

Some were forex traders offering customers what looked like the ability to make easy money on the side.

Mason said: “These are overwhelmingly offshore companies, and there’s very little or nothing that can be done if the money is gone. If there is no presence in New Zealand, the money is not in New Zealand and it’s not a licensed operator, there’s incredibly little we can do.”

He said there was a risk it would become more of a problem over time.

Complaints about firms withholding client money have increased year-on-year through 2014, 2015 and 2016 from just under 10 per cent to almost 30 per cent of complaints.

He said advisers were often the first point of contact for people who were considering the schemes. “We would love to hear from them if they do get this. I’m sure their automatic response is to tell the client not to touch it and that’s perfect but also tell us. Particularly for unregulated, unregistered businesses, it’s pretty much the only way we can see what’s going on is from complaints.”

Mason said the FMA had more power under the FMCA to deal with market providers’ conduct but there would always be some who deliberately set up outside its jurisdiction.

The FMA’s response was to alert the public when it was concerned, with warnings on its website.

Mason said the solution was likely not wider regulation because a lot of what was being complained about was not the sort of thing that could be regulated for. “A very high percentage of complaints are simple scams, or customers can’t get their money back.”

Tags: FMA

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Comments from our readers

On 13 April 2016 at 9:11 am Dirty Harry said:
If there are crooks doing investments that are operating outside the FMA's jurisdiction then the problem is the jurisdiction is not big enough, so fix it.

If there are overseas crooks setting up here and promoting unregulated products then the problem is the regulations. So fix it.

If the crooks are advertising overseas-based products that cannot be supervised or regulated by NZ authorities then the problem is the law. So fix it.

At least when they finally do come to an AFA they'll get the full works of compliance, because you know, before regulation they were all crooks....

When, oh when, will the regulation and enforcement efforts actually be directed to the real causes of the problems?

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