The FMA has released its first report providing a snapshot into the main themes and issues emerging from the FMA's inquiries, investigations and enforcement activities over the past year. The FMA received over 4000 complaints and enquiries during the 2011-2012 financial year, mostly relating to the provision of financial advice, the financial advisers regime, securities issuers and failed finance companies.
Since its establishment in May 2011, the FMA has engaged with the market across various issues, including:
- Taking action against market participants who made misleading offers
- Cautioning investors against and issuing warnings to those promoting unacceptable KiwiSaver sales practices
- Inquiring into misleading offer documents and pursuing enforcement action against those involved
- Obtaining voluntary compliance for offer document requirements
- Beginning monitoring visits with financial advisers across New Zealand
- Initiating and continuing court action and investigations regarding failed finance companies.
The report includes various findings from the finance company investigations and prosecutions. The FMA found throughout the prosecutions that the offer documents and advertisements contained significantly inadequate and incomplete disclosure. There was also on occasions a failure of corporate governance. The cases have sent a message to the corporate community regarding director responsibility. The FMA found the following common themes:
- Directors are required to show more than mere honesty
- Directors are expected to understand the fundamentals of the business and financial reporting
- Disclosure documents are assessed by the overall impression conveyed by the offer documents
- Directors must review statements of disclosure from a "prudent but non-expert" perspective, setting aside their inside knowledge
- Directors have a non-delegable duty not to make misleading or untrue statements in offer documents.
The FMA has also undertaken the following activities during the past year:
- Investigating and largely maintaining asset preservation orders granted in 2010
- Initiating perimeter surveillance of financial markets participants who appear to be non-compliant
- Investigating alleged misconduct by financial advisers in breach of their Professional Code
- Successfully defending an appeal against its decision to decline an authorisation application for a financial advisor
- Engaging and educating issuers in circumstances where it appears that issuers are making securities' offers to the public without a registered prospectus or investment statement
- Warning about unsolicited share purchase offers and some enforcement action against those making unsolicited offers to potential investors
- Carrying out inquiries into market manipulation and possible misleading trading
- Considering using its powers to initiate or take over civil actions against financial markets participants.