The man called a “director for hire” by the FMA has been found guilty of abuses of the FSPR system.
Michael Reps, NZ-based director of Pegasus Markets Limited, has been sentenced to two months’ community detention and 90 hours’ community work after criminal charges were brought by the FMA for breaches to the Financial Service Providers (Registration and Dispute Resolution) Act.
The FMA charged Reps after the company stated on two different websites that it was registered on the FSPR, despite it being deregistered.
Pegasus was warned by the Companies Office about the misleading statements but continued the misrepresentation for two-and-a-half years.
Karen Chang, FMA head of enforcement, said that the sentence will send a strong message of deterrence to those who abuse the FSPR.
“This is an important ruling as it shows there are criminal consequences for local ‘directors for hire’ – people who try to profit off their New Zealand residency by becoming directors for offshore businesses with no real New Zealand presence. We continue to monitor the FSPR to ensure that those who are on it are there for proper reasons.”
As a part of Reps’ conviction he cannot be a director of a financial services firm for five years.
In December 2020, Judge June Jelas sentenced Pegasus Markets to a fine of $200,000. In a statement to the court she said, “New Zealand cannot be a country where breaches of its financial markets regulatory systems can be an acceptable commercial consequence.
“The Court’s response to breaches needs to be sufficient to ensure financial operators in the New Zealand market will incur real and meaningful consequences if they breach the regulatory framework.”
Timing of the sentence comes when extra scrutiny will be on the FSPR as the FMA keeps a close eye on the industry with regulatory changes beginning March 15.
The FMA has used its powers under the FSP Act to direct the Registrar to deregister companies from the FSPR.
In September 2020, Pegasus was found guilty of two charges of breaching section 12 of the FSP Act, which states that no one can purport to be registered on the FSPR unless they are registered on the FSPR and a member of an approved dispute resolution scheme.
Reps was also found guilty of breaching section 40 for knowingly failing to prevent Pegasus from committing an offence under the Act.
Other prosecutions the FMA has pursued in relation to businesses or individuals purporting to be registered on the FSPR include Morgan DeVere Corporate Finance Limited (fined $40,000 and its director sentenced to 75 hours’ community service) and Garry James Patterson (sentenced to 200 hours’ community service and three months’ community detention).
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