Second company and director charged over FSPR abuse

15 May 2018

The Financial Markets Authority (FMA) has filed criminal charges against a second company and its New Zealand based director for breaching the Financial Service Providers (Registration and Dispute Resolution) Act (FSP Act) 2008.

The company is charged with two counts of breaching section 12 of the FSP Act.

The New Zealand based director is charged with one count of breaching sections 12 and 40 of the FSP Act. The charges have been filed at the Wellington District Court.

The FMA alleges the company continued to hold out on two separate occasions that it was registered on the Financial Service Providers Register (FSPR) on its website after it had been deregistered and despite subsequent warnings from the Registrar of Financial Service Providers (the Registrar) and the FMA.

Karen Chang, FMA Head of Enforcement said, “Last year we warned directors who encouraged or facilitated abuse of the FSPR that we would be stepping up enforcement action. We are now taking that action. This is the second proceeding the FMA has brought on this front and inquiries into further cases are ongoing.”

The FSPR has been abused by businesses and individuals who use New Zealand’s reputation as a well-regulated country to target overseas investors. The FMA and the Registrar invest significant time and resources in tackling this problem to protect the legitimacy of New Zealand’s financial services firms.”

Section 12 of the FSP Act provides that no person, including a corporation, can hold out that it is in the business of providing a financial service unless it is registered on the FSPR and a member of an approved dispute resolution scheme. Section 40 of the FSP Act covers a director’s liability if he/she knowingly authorises or knowingly fails to prevent a corporation committing an offence under the Act.

Each charge for breaching section 12 of the FSP Act carries a maximum fine of $300,000 for a company and a maximum penalty of either $100,000 fine and/or 1 year imprisonment for an individual.

The FMA’s FSPR report published last year sets out background on its work to tackle abuse of the FSPR.

Details on the first case can be found here.

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