Oakfx Distributor Responds to FMA Warning
11th September 2013
Oakfx Distributor Responds to FMA Warning
Recently the Financial Markets Authority issued a warning regarding foreign exchange software product OakFx, which is distributed in New Zealand by Phoenix Forex Ltd.
This announcement came as a surprise to Phoenix Forex as we have had constructive dialogue with the FMA for some time in an effort to satisfy them that we should not ultimately need a license to trade futures because Phoenix Forex is simply a distributor of a software product.
This consultative process has been conducted on an off over 18 months both directly and through our legal team, including a well--respected barrister and QC.
We have taken the following (well documented) steps to comply with and/or answer any questions they have;
-- Changed our purchase documentation
-- Updated the website
-- Changed marketing material
-- Added risk statements to outgoing radio advertisement
-- Changed brokers and the method the software terminates trades in an effort to satisfy them that the broker trades the “spot” market, not futures
-- We met several times with FMA representatives and responded at length to each request for information and clarification, we have continued to be available and welcomed conversations with the FMA and any interested parties, we did not hide from scrutiny as has been suggested in some media
-- We have given the FMA trading statements that show past returns to support our marketing (despite some claims to the contrary), notwithstanding which the FMA never asked to see a demonstration of the software or watch a live account
-- Most recently we invited the FMA to join us in a meeting in Auckland with one the brokers, the software developer and our legal team in an effort to further update our paperwork, and the paperwork of the broker to satisfy the FMA.
The FMA failed to respond or attend the meeting.
Following which our lawyers contacted them verbally and sought a meeting to resolve the issues they had once and for all.
The response to that request for clarification of their position and meeting request was the statement issued (some days later) yesterday.
We want to be clear that Phoenix Forex fully supports the regulation of the financial markets and the FMA’s role in protecting investors.
We do also stand by our position that we are simply distributing automated software, developed offshore, which ultimately uses funds in a client controlled, ASIC regulated broker account, and for this reason (and with some advice on the subject) it was never envisaged that the company would need to be licensed.
We also note that it took the FMA 15 months to form the view that it does.
We feel that the operations of Phoenix Forex, as distributor for OakFx may have fallen within a “grey area” for the act and perhaps the FMA and that as a result their task was a difficult one.
That said, given the FMA’s sweeping powers under the new act following the many finance company collapses, along with their unlimited legal resources, sadly we of course have no option but to comply fully with their position, irrespective of the consequences to our customers (many of whom have become very good friends) or our staff (who are like family).
Further and as a result of the regulatory environment in New Zealand now (we note their view that we need to be licensed financial providers does not apply in most jurisdictions globally) the developer of the OakFx software has withdrawn the license to distribute in New Zealand from Phoenix Forex NZ Ltd.
We understand however that the developers intend to continue to support the product and local NZ customers from Australia.
The developer is looking to appoint a customer service person to work alongside them in Australia for this purpose and contact details will be sent in due course for this.
The timeline and decisions surrounding this are entirely in their hands.
As some misinformation has already appeared in selected media, we wish to point out the following;
1. All clients who purchased OakFx, signed documentation that clearly stated the product came with a degree of financial risk and that past returns are not indicative of future returns.
We retain copies of these documents.
2. Over the past several years, since the Global Financial Crisis started, many forms of investment have not generated the returns expected by investors and there have been varying degrees of capital loss.
OakFx has produced superior returns than many of these other investments.
3. Although Phoenix is under no legal obligation to assist clients who have not enjoyed the returns they were anticipating, we have been working with a small number who have experienced unusually large individual open positions following the Euro Crises earlier in the year to reset their accounts.
The FMA's statement may have put at jeopardy our ability to assist these clients and more information will be made available to those clients in coming weeks as Phoenix Forex NZ Ltd works with the developer to assist.
We also note that in cases like this a “group mentality” can take hold and whilst the FMA has received only a few customer complaints, there may now be more as a result of media interest, this may be aggravated by FMA restrictions which limit our ability to assist or answer queries in the normal course of business.
Again we re--iterate that it was our fervent desire to on--sell a product with integrity, hard work and honesty and which we believed would significantly assist people in generating a passive income.
We feel both Phoenix Forex and the developer of OakFx have acted honourably and generously in assisting any customers that expressed concern with the product, and whilst our replies occasionally may not have been prompt enough for some, we feel the developer did far more to assist than many others would have done.
We note, for example, that there is no line of people outside Telecom Corporation seeking a refund on share--losses for the last 10 years of over 50% (even after adjusting for the breakout of Chorus) We are doing our very best to limit the impact of the FMA decision on the viability of the wider business, the product and its ongoing support via the developer.
The OakFx Team