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FMA releases enforcement and investigations report 2015

28 August 2015

FMA releases enforcement and investigations report 2015

The Financial Markets Authority (FMA) today published its enforcement and investigations report for the year ending 30 June 2015.

The report shows the FMA’s enforcement and investigations activities closely reflect the FMA’s focus on the seven strategic priorities that it identified in its Strategic Risk Outlook, released last year.

The key issues arising in most of the cases this year related to concerns with governance, culture and conflicted conduct.

The report highlights the use of a wider range of regulatory responses to poor compliance and misconduct including:

• the use of enforceable undertakings, or representations, agreed with either individual directors, businesses or large institutions

• interventions, such as third party reviews of firms processes

• FMA-imposed sanctions including through payments in lieu of penalty

• warnings and directions

• directing the Registrar to remove 28 companies from the Financial Services Provider Register.

The FMA’s use of direct responses - that do not depend on court action - reflects the new approach to regulation enabled under the Financial Markets Conduct Act 2013.

During the reporting period the FMA has secured $51.14 million in compensation for investors, and $1.71 million was awarded in penalties and fines.

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In total, the FMA was involved in 51 investigations and 28 litigation matters during the year.

As the investigations into legacy finance company cases were brought to a close, live and current issues in the markets are increasingly within the FMA’s focus. Almost two-thirds (63%) of the FMA’s enforcement inquiries and investigations have focused on primary and secondary markets issues. These included disclosure obligations, insider trading and market manipulation.

Of the 28 litigation matters, six resulted in court judgments, 12 are still in court, two were settled, one was withdrawn following FMA intervention, and the remainder were either resolved before proceedings were filed or were referred to another agency.

The court judgments included:

• four cases relating to failures to file financial statements with fines against seven directors, totalling $210,625

• the lawyer to Belgrave Finance Limited sentenced to four years and nine months imprisonment following a joint SFO/FMA prosecution

• the High Court awarding $130,000 pecuniary penalty in a market manipulation case.

Belinda Moffat, director enforcement and investigations said, “The FMA has taken considered action to investigate and hold to account serious misconduct that threatens the integrity of the markets and the way that financial services are delivered to customers. A key objective underpinning our action is to raise investor and market confidence and in turn to support economic growth in New Zealand.

“To achieve this objective, we have used a wide range of regulatory tools this year. However, the market and investors should also clearly see that serious misconduct will attract the full force of the FMA’s powers. Non-court outcomes have been achieved in some instances as a result of firms and individuals engaging directly with the FMA to address our concerns. We want this kind of response to continue as we bed down the new regime and strive to achieve a confident and efficient market.”


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