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FMA welcomes World Investor Week

2 October 2017

FMA welcomes World Investor Week and urges investors to use a licensed provider

The Financial Markets Authority (FMA) is urging investors to become familiar with some home truths about the risks of investing with off-shore, un-licensed providers as part of the first ever World Investor Week (2-8 October).

The FMA is participating in the initiative, run by the International Organization of Securities Commissions (IOSCO) to promote investor education and protection across six continents. The FMA is a member of IOSCO.

As part of the protection message, the FMA is highlighting the case of Diana[1] who lost US$5,000 (NZ$7000) after trading in unregulated binary options. Her case reflects many of the issues raised with the FMA by investors in this area, such as:

• click-through internet advertisements about ‘making easy money from home’

• aggressive sales tactics

• companies refusing to return money

• cold calling and get-rich-quick schemes.

The FMA is reinforcing to investors in New Zealand that selling financial products by cold calling is illegal.

The FMA has licensed more than 200 financial services firms in New Zealand since 2013.[2]

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Paul Gregory, FMA Director of Investor Capability, said, “Baked into the FMA licensing process are some basic protections for investors. Investors should expect to be communicated to clearly about the benefits and risks of a product. They can complain to a dispute resolution service if they have any issues with a financial service provider. Licensing also means we are able to hold providers to account for the way they treat their customers.”

To gain a licence, businesses and individuals must meet a number of requirements including:

• showing the FMA they can provide the service effectively

• showing that the managers and directors are ‘fit and proper persons’

• there being no reason for the FMA to believe they are likely to contravene licence obligations

The FMA regularly receives complaints from consumers who have been caught out by slick websites and promises of high returns from off-shore. These complaints centre on products like binary options and foreign exchange trading. Where an unlicensed, unregulated company based off-shore withholds money from an investor, it is very hard for the FMA to help.

The FMA urges investors to do their homework. Don’t think a company is legitimate because their advertisement appears on what seems like a credible website. Before investing:

Check FMA lists of individuals and businesses to be wary of

• Check the FMA website for lists of providers, markets and individuals that are licensed or authorised to operate in New Zealand.


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