In Financial Markets Authority v Vivier and Company Limited  NZCA 197, the Court of Appeal has clarified the circumstances in which a financial services provider (FSP) might be deregistered on the basis that its registration is misleading. In doing so, it reconciled the difference between two contrasting High Court authorities - that of Brewer J in the case under appeal, and that of Nation J in a second case, Excelsior Markets Limited v Financial Markets Authority  NZHC 3334.
In Vivier the respondent was a New Zealand company registered as a FSP under the Financial Service Providers (Registration and Dispute Resolution) Act 2008. In February 2015 the Financial Markets Authority (FMA) became concerned that Vivier was not providing any financial services in or from New Zealand. The FMA formed the view that the fact of Vivier's registration in New Zealand might be misleading to customers or damage the reputation of New Zealand's financial markets. Accordingly, the FMA directed that Vivier be deregistered. It was that direction which was challenged by way of appeal in the High Court and further appeal by the FMA in the Court of Appeal.
Brewer J had held that that direction to deregister was invalid for the following reasons:
- The statutory framework required the FMA to have evidence relating to the particular FSP in terms of whether its registration was misleading or harmful to New Zealand's market reputation
- The FMA had failed to observe the principles of natural justice, in that it had not disclosed to Vivier the anonymous complaint nor a news article that was said to be the basis for the complaint
- The FMA had acted unfairly in failing to provide Vivier with the further information requested in its submissions.
In a related decision, Nation J differed on a number of points to Brewer J. Relevantly, those included:
- That the FMA did not need further evidence specific to the particular FSP to justify a direction requiring deregistration – it could rely simply on the fact that a FSP was providing services almost wholly outside New Zealand
- Relatedly, the FMA was a specialist body with knowledge as to how financial markets operated, which meant that its decisions (provided they were reasonable) were likely to be respected.
The Court of Appeal, by and large, agreed with Nation J and overturned the decision under appeal. In particular, the important points for FSPs are that:
- The FMA is entitled to look as to whether or not the FSP is providing financial services in or from New Zealand, and whether it is generating any associated financial activity in New Zealand – if it were not doing or intending to do so then "alarm bells should sound"
- It would still be open to bona fide FSPs with a place of business in New Zealand, but no relevant financial service activity in New Zealand to seek registration if they could show good reasons for their registration
The FMA, as a specialist body, was entitled to draw appropriate inferences based on its own expert knowledge and experience in making its decisions.
The decision paves the way for the FMA to seek deregistration of any FSPs whom have a place of business in New Zealand, but which do not offer financial services within New Zealand – unless such FSPs can demonstrate that they are nonetheless a substantial and reliable FSP with proper interests in New Zealand.