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An Apology from the FMA?

Last week we saw an apology of sorts from Sean Hughes, the outgoing CEO of the Financial Markets Authority, in a speech to the Workplace Savings NZ conference in Wellington.

The full speech can be seen at

Coverage on Stuff can be seen at

Hughes said in his speech “So let me say this now: to the investors in New Zealand who were left out of pocket and betrayed by the actions and failings of a sad procession of both participants and public officials, I am sorry. You were entitled to expect more of the market and your gatekeepers and you were let down. You have every right to feel aggrieved. Though I was not personally part of that apparatus of the past, I will not walk away from accepting the accountability which followed me into my role. Some may say my words are empty gestures – I say they are heartfelt and cement the recognition that collectively we have wronged a generation of investors.”

A good start but unfortunately, later on in his speech, Hughes really sticks it to investors:

“While commentators have suggested that New Zealand’s financial literacy levels were part of the reason many investors lost so much, its no excuse for not taking responsibility for your own financial decisions. If you are intent on relying solely on friends and family for advice, not researching your investments properly, not seeking independent advice or if you’re not even prepared to educate yourself, then you must be ready to accept the risk that comes with it. When independent information and advice was available, you chose either not to access it or not to take it. Either way, its a conscious decision to ignore that which would otherwise have been available. Many may say that response is harsh; however why are people willing to take a risk with their money, but they plan and prepare for other aspects of their lives? Responsibility begins at home and investors need to accept that.”

We say to Mr Hughes - RAM investors do take responsibility for their investment decisions, but we also expect the authorities to respond when they get written warnings of fraud, and not to give valueless certification to market advisers. The RAM investors say it’s the FMAs job to help reduce market risk, not to increase it.

Elsewhere Hughes says:

“I often like to tell law and finance students that a well thought-out regulatory regime is like a perfectly built motorway. You can have the best one in the world with all the safety features, clear signage and capable, qualified drivers but that won’t stop accidents and crashes happening along the way. We can’t predict how drivers will perform in adverse weather, nor can we anticipate every drunk or dangerous driver on the highway of our markets. What we can do, is to help good drivers take adequate precautions against known or foreseeable risks.”

Bad analogy Mr Hughes – we all expect ‘qualified drivers’ on our roads, but the FMA gave David Ross a ticket to drive without making him sit a driving test.

WHAT MR HUGHES SHOULD HAVE SAID – “We accept that the regulatory regime has not provided ways to unwind Ponzi schemes in a fair and just manner, and we have left RAM investors in a legal black hole. We will use our powers under the FMA Act 2011 to help create solutions to the problems, and we wont just dump the problems onto the investors.”



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