Financial Markets Authority boots 23 overseas entities off Financial Services Providers Register, Napier-based registration agent hits back

Financial Markets Authority boots 23 overseas entities off Financial Services Providers Register, Napier-based registration agent hits back

By Gareth Vaughan

The Financial Markets Authority (FMA) this week announced it has expunged 23 offshore entities from the Financial Services Providers Register (FSPR) so far this year.

Given numerous such entities have dragged New Zealand's name through the mud over recent years this sounds encouraging.

However, 21 of them remain registered as NZ companies via the Companies Office, and there are likely to be many more "NZ" financial service providers out there somewhere, keen to be associated with us, but that we might prefer weren't linked to NZ.

Meanwhile, the Napier-based registration agent of 11 of the 23 has hit back, saying the FMA is lowering the regulation and oversight of these companies by removing them from the FSPR, and her clients were abiding by the rules.

Whilst everyone from the likes of local registered banks, building societies, financial advisers, insurers, foreign currency exchange dealers, fund managers and some trustees are required to register on the FSPR, numerous entities that have little, or no, relationship to NZ also register. And the 23 the FMA has culled, see full details on them below, fall into this last category.

They have directors and shareholders listed, in their Companies Office registrations, in such diverse locations as Hong Kong, Dubai, Cyprus, the Seychelles, Israel, Kuwait, Russia, Georgia, Turkey, China, India, Japan, Egypt, Australia, the British Virgin Islands, Malaysia, the Philippines, and Warkworth.

Many say they operate in the foreign exchange, or forex market, and 11 of the 23 use a Napier-based company as their registered office and address for service. 

There's likely to be many more like them out there. To provide some context that the FMA may have hit the tip of a large iceberg, there are 3,472 companies currently registered as financial service providers and 8,508 individuals, according to the Ministry of Business, Innovation & Employment (MBIE) which oversees the Registrar of Companies, that in turn maintains the FSPR. And in just two months back in 2012, the Registrar of Companies deregistered 151 financial service providers and advisers.

Operating overseas, if at all, they take advantage of NZ's simple company registration system, then register as a financial services provider and sign up to one of the local financial services dispute resolution services. From there some claim to be NZ regulated financial service providers. In the past some NZ registered companies have even claimed to be NZ banks, despite not being registered as such with the Reserve Bank.

Since last July the FMA has had the power to direct the Registrar of Companies to remove companies from the FSPR where it's likely the company is giving a false or misleading impression about the extent to which it is regulated in NZ. The 23 removed thus far are the first such batch the FMA has removed under these powers.

What about the Companies Office?

But why aren't they also gone from the MBIE run Companies Office? Because, a MBIE spokesman says, deregistration of a financial service provider doesn't affect its registration as a company under the Companies Act 1993. 

"A deregistered financial services provider may continue to be registered as a company provided it complies with the requirements of the Companies Act, for example, it files an annual return. If a deregistered financial service provider company wishes to be removed from the companies register, it can apply under section 318(1)(d) of the Companies Act," the MBIE spokesman says.

Since the NZ registered SP Trading Ltd hit the headlines several years ago for chartering a plane to transport North Korean arms and explosives to Iran, and Kiwibank shut the bank account of  GT Group - the entity that set up SP Trading - so-called NZ shell companies and offshore finance companies have seldom been out of the news somewhere for long. Among the things some have been caught doing, or accused of, are smuggling, money laundering, tax fraud, and running Ponzi schemes.

Many such entities have featuring here at interest.co.nz. We've also highlighted how NZ's anti-money laundering law creates the opportunity for an undesirable form of regulatory arbitrage given it doesn't tell you what its territorial scope is. Effectively this means entities that are incorporated or formed in NZ and carry on financial activities wholly outside NZ, aren't 'reporting entities' under the Anti-Money Laundering & Countering the Financing of Terrorism  Act.

Asked what, if any, legitimate reasons there are for companies solely operating overseas to register on the NZ FSPR, an FMA spokeswoman told interest.co.nz; "A legitimate reason for an established overseas financial services company to register on the FSPR is where it is seeking to offer its products or services to NZ residents. In that case they may also have other legal obligations to offer services in NZ such as licensing, depending on the type of services or products they intend to offer."

However, MBIE says if any person or business is providing financial services from a place of business in NZ they are required to register regardless of where the financial service is actually offered. Thus if your registered office is in NZ, even if it's effectively just a PO box or serviced office, you must register on the FSPR.

What about the local agents?

The FMA says it has prevented another 20 entities from even registering on the FSPR this year, but won't name them. The FMA spokeswoman says the regulator has also received about 900 complaints and tip offs about entities on the FSPR over the last two years.

The FMA has also started to look at the role of local registration agents, some of whom may be listed as directors of dozens of companies.

"Our immediate focus has been on ensuring the integrity of the register by reviewing referrals from the Registrar where there were concerns about whether the substantive business activities of a firm require it to be registered on the FSPR. Local registration agents in NZ is a new area of focus for the FMA following the new powers that we have been given to remove companies who are abusing the register," the FMA spokeswoman says.

"The FMA has no power to prevent NZ registration agents taking a role as director. However, the FMA may decline to register a company where we have reason to believe that information relating to the local director impacts the integrity and reputation of the market. For example, where the person is a director of an extensive number of companies such that it would not be possible to properly discharge their directors duties."

The FMA says it's concerned local registration agents are facilitating the registrations of these dodgy offshore entities, including by taking a role as a director and by providing registered offices to offshore companies. This gives the appearance of offering a financial service from NZ, when the substantive business, "where there is any," occurs overseas.

"The FMA will look closely at the ability of such directors to carry out their duties under the Companies Act, especially where multiple directorships are held."

The Napier connection

Of the 23 entities targeted by the FMA 10 list Business Results (HB) Ltd as their registered office and address for service at level 1, 1 Dickens St, Napier. Deborah Errington Jeffares is listed as sole director, with her and Kelvin Barry Jeffares named as shareholders. Another uses the associated Napier-based Acura Accounting as its registered office. 

Asked about Business Results (HB) Ltd and its directors and shareholders, the FMA spokeswoman would only say; "We cannot comment specifically about any entity."

However, Deborah Jeffares provided a detailed response to interest.co.nz's questions via email. In it she said her firm was approached to undertake the accounting, compliance, secretarial and some back office functions for clients with overseas shareholders and directors. These clients had a medium term view to establish their own offices in NZ, she said.

"The FSPR was only ever a register of providers which imposed minimal obligations. Due to this we imposed additional requirements on our clients who were registered, including holding the authority and power to deregister, basic KYC (know your customer) and funds management protocols to prohibit companies who would be engaging in money laundering activities," Jeffares said.

"Our clients always understood that being on the FSPR was only ever a register and they could not state that they were regulated or licensed by the NZ authorities. Our staff regularly reviewed registered clients websites to ensure that there was no reference to licence or regulated or language of a similar nature, they could only state that they were registered," said Jeffares.

24 hour screening

She said all her firm's overseas resident directors and shareholders are screened every 24 hours via a worldwide database for any adverse press, convictions or actions taken against them or any company and/or person they are associated with.

"In short, we provide an additional layer of compliance to ensure these companies meet the minimum standards required by the FMA," said Jeffares.

"As our clients do not state that they are licensed or regulated by NZ authorities we have requested clarity from the FMA to what is required in order for them not to give a false or misleading impression about the extent to which it is regulated in NZ. The FMA have responded in saying that this will be judged on a case by case basis," she added.

A number of her clients are looking to set up their own offices in NZ, Jeffares added, employing their own staff. But if deregistered they can't do so. Furthermore some clients are considering applying to the FMA for a derivatives issuer licence.

"We understand from the FMA that the (financial) service providers who are now not registered can continue their business activities via their NZ company," Jeffares, who said she isn't a director of any company that's a client, said.

She went on to suggest the unintended consequence of the FMA’s actions is lowering the regulation and oversight of these financial service companies.

"We have been working very closely with both FSPR and the FMA, we have responded to every request that we have received and are working with our clients to ensure they adhere to the FMA’s instructions."

"We are not aware of any action being taken by the FMA against any of our clients other than in respect to directing the FSPR to remove them from the FSP register. We are also not aware of any action being taken against our company or me personally, (and) the FMA have advised us that the notice to deregister these clients does not prevent us from continuing to provide our current services," said Jeffares.

Apart from Business Results (HB) Ltd, the Companies Office also shows Jeffares as sole director and shareholder of Archer International Consultants Ltd.

Here's Deborah Jeffares' response in full.

The club of 23

Here are the 23 entities deregistered from the FSPR:

Allied Victory International Limited, which gives its address as 47A Mt Wellington Highway, Auckland, and whose director is listed as Kam Chuen Tse of Hong Kong. Allied says it offers "24-hour on-line trade on the forex market through Internet or through a phone desk" from "international offices" on Mt Wellington Highway.

Apex Financial Services Limited gives its address as 38 Birmingham Drive, Middleton, Christchurch. Its director is Amirreza Mohammad Hassani of Dubai, and its shareholders Mohsen Rezaeiun and Mohammad Rezaiun of Tbilisi, Georgia. Apex says it's "a fast growing, registered by FSPR (of New Zealand), online forex and commodities broker".

Big Boss Financial Limited's shareholder and director is listed as Christopher Jason Conde of the Philippines with its registered office BDS Chartered Accountants Ltd, level 12, 17 Albert Street, Auckland. Big Boss describes itself as a forex company.

CTFC Limited operates under the brand name Caesar Trade, saying it's a forex company that wants to "make your money go farther." Its registered office is Spinifex Corporate Solutions Ltd at 181 Willis Street, Wellington. Its director and shareholder is listed as Eric Pesach Harbor of Israel.

Derbivi Limited has as registered office at Business Results (HB) Ltd, Level 1, 1 Dickens Street, Napier, 4110. It's also described as a forex company.

Dynamic Capital Advisors Limited with its registered office at Business Results (HB), its shareholders and directors are listed as David Christian Hurbert Dubrulle and Mohammad Zeidan of Kuwait, with Dynamic described as a forex trading provider.

Eastern Union Corporation Limited is another out of the Business Results (HB) stable. Directors are Shurong He of China, who is also shareholder, and Michael Reps of Warkworth. It's described as a stockbroker or trader.

Excelsior Markets Limited's "about us" page is undergoing maintenance. Its office is listed as Equity Trust International of Khyber Pass in Auckland. The director is Steven James Green of Manurewa, and shareholder is Excelsior International Ltd of the UAE.

Exo Group Limited, apparently a forex trader, is also of the Business Results (HB) stable. The director and shareholder is Timur Bashirov of Russia.

FGX Limited  has BDS Chartered Accounts on Auckland's Albert Street as its registered office. The director and shareholder is listed as Kenya Moriwaki of Tokyo, Japan. It's described as a "Forex Currency Trading broker beased in NZ, providing Foreign Exchange (Forex) trading services to all over the world."

FX Primus Limited/Strategic Markets Limited has as its address plaza level, 41 Shortland St, Auckland. The director is listed as Thomas Kilkenny of London, and shareholder a London company named Proton Markets Ltd. It's "a fully licensed online brokerage firm domiciled in the EU Member state of Cyprus."

Global Prime Partners Ltd has Business Results (HB) as its registered office.  The director is again Warkworth's Michael Reps, with fellow director Jie Chang of China also listed as shareholder.

GV Global Limited another with Business Results (HB), has the trade name Greenvault FX. The director is listed as Jagadish Shanmugasundaram, of Chennai, India. The shareholder is Oragent Ltd of London.

House of Borse Limited "is a global financial think tank. It was founded to bring all the stock markets all over the world together within one platform and one trading account."

IKO Limited's address is given as unit 10c, 17 Albert Street, Auckland.The  director is Niel Jorge Lao of Auckland's Blockhouse Bay. The shareholder is Iko Global Ltd of the British Virgin Islands.

Integer Capital Markets Limited is yet another whose registered office is with Business Results (HB).  The director is listed as Praveen Kumar Alapati of Hyderabad, India, who is also a 49% shareholder. The majority owner is Transpebble Ltd of the UK. It does forex trading.

Invest Foreign Exchange Limited also has a registered office via Business Results (HB). The director and shareholder is listed as Hamed Ahmed Hamed Eltahhan of Egypt. The company says it "trade the world forex, CFDs, commodities, indices trading." Forex, CFDs, Commodities, Indices trading

MyFX Markets Pty Limited. It has 31c Pandora Place, Pakuranga as its registered office. The director is Xinshi Yang, and shareholder's the NSW domiciled Myfx International Pty Ltd.

Tradesto Limited's registered office is with Acura Accounting in Napier.The director is Soon Yi Law of Malaysia, with shareholder Tradesto Holdings Ltd of the Seychelles.

Tradesto's website says the company "is registered to offer financial services from New Zealand.Tradesto Limited falls under the Financial Markets Authority regulatory structure and complies with the Financial Service Providers (Registration and Dispute Resolution) Act 2008, which includes a requirement to be registered on the Financial Service Providers Register. Tradesto Ltd is a member of Financial Services Complaints Ltd."

Tradesto's website gives its address as Napier below a picture of the Auckland skyline.

Turbo Trading Limited has Business Results (HB) as its registered office. The director is Dmitry Gron of Cyprus, and shareholder TRFX of Cyprus. "TurboForex is an industry leading provider of forex, commodities and stocks/indices CFD brokerage services."

United Market Oracle Limited's address is listed as 24b Moorefield Road, Johnsonville, Wellington. The director is Ariznan Bin Mat Arif of Malaysia, and shareholder Golden Cisco Pty Ltd of the Seychelles. "With headquarters in New Zealand, UMOfx provides superior consulting services for Forex market."

Trade24 Investments Limited is another with its registered office as Business Results (HB). A forex trader, its director and shareholder is listed as Jacob Arye Kaminski of China.

3TG FX Financial Limited describes itself as a forex brokerage.

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