By Gareth Vaughan
With New Zealand's foreign trusts taking their turn under the spotlight thanks to the mass leak/hack of decades worth of documents from Panamanian law firm Mossack Fonseca, the Financial Service Providers Register, another running sore on NZ's international reputation, is poised to return to share some of the attention.
As part of a review of the Financial Advisers Act 2008 and the Financial Service Providers Act 2008, the Ministry of Business, Innovation & Employment (MBIE) has been reviewing misuse of the Financial Service Providers Register (FSPR). Submissions were called for by January 29 on options MBIE outlined for tackling the problem. (My submission can be found here).
Asked this week when we may hear more, a MBIE spokeswoman told interest.co.nz feedback was currently being analysed.
"We expect that copies of submissions will be published in the coming weeks. As indicated in the Options Paper we are looking to progress measures to address this issue ahead of any other changes to the financial adviser regime," the MBIE spokeswoman said.
She didn't, however, provide any timeframe.
Anyone in the business of providing a financial service, such as a financial adviser, bank, lender or insurer, is required to be registered on the FSPR. However, as MBIE puts it, some offshore-controlled firms have sought to register on the FSPR in order to take advantage of NZ’s reputation as a well-regulated jurisdiction. Such entities then misrepresent that they are licensed or actively regulated in NZ when they are merely registered. Plenty have done so.
The Financial Markets Authority (FMA) has powers to direct the Registrar of Companies to decline a registration or de-register an entity if it considers that registration creates a misleading impression about the extent the provider is regulated in NZ or will damage the integrity or reputation of NZ’s financial markets, or NZ’s regulatory arrangements for those markets. (See more articles on this issue here).
Since taking on these powers in 2014, the FMA has used them to remove dozens of entities from the FSPR, and stop others from even signing on. However, its decisions can be challenged. The regulator's decision to remove Vivier and Company from the FSPR was successfully challenged in the High Court last year, and the FMA went to the Court of Appeal to appeal that ruling in February. No judgment has yet been issued.
The MBIE spokeswoman said MBIE was "monitoring developments in the Vivier case to inform next steps, but we are continuing to develop our proposals while the judgment is pending."
FMA CEO Rob Everett told interest.co.nz last month the big issue, from the FMA's perspective, is whether entities that have little or no real connection with NZ and aren't offering financial services here, should be on the FSPR. Another issue is the confusion caused by the fact that being registered doesn't actually mean these entities are regulated.
"That's one of the issues before the court. They need to be able to interpret the legislation in a way that provides clarity on that issue. So what really is required in New Zealand for you to be on the register? And then how we (the FMA) exercise powers to take people off," Everett said.
He said the FMA wants "a really very straight forward change" to the wording in the legislation to make clear "the degree of nexus to New Zealand" that's really required for someone to be on the register.
"Bearing in mind, as I say, the register is designed to benefit New Zealanders, not companies operating outside of New Zealand. So real clarity on the territorial aspect," said Everett.
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