Investment watchdog warns over unlicensed operators

Make sure you have a grip on where your money is being invested. Photo/Nick Reed.

New Zealand's investment watchdog is warning the public to be wary of unlicensed and unregistered operators after it found more than half of the 2000 complaints it has received since July 2014 relate to businesses operating outside the law.

Most companies offering financial services or products to the New Zealand public have to be either registered or have a license from the Financial Markets Authority (FMA).

Liam Mason, head of regulation at the FMA, said investors should protect themselves by sticking to regulated companies and New Zealand-based businesses.

Many of the complaints received related to forex trading services, investment schemes, property seminars and forex training software with some relating to overseas companies.

Mason said while the regulator was on the look out for New Zealand firms operating without a license often it did not find out about overseas companies until an investor complained.

And by then it may be too late.

Mason said outside the local jurisdiction the FMA may not be able to help people recover funds or take legal action.

Mason said it was often hard to check if an overseas company was legitimate.

"It's incredibly easy to create an impressive internet presence."

One way people could check if a company was legitimate was to investigate its reputation by talking to other people who were financial professionals or advisers in New Zealand.

"If you don't have those sorts of contacts go with a New Zealand business and check if it has a physical presence. Go visit them," he said.

While companies that offer foreign exchange services to change your money don't need a license to operate, any company offering derivative trading or margin lending on foreign exchange does.

Companies that offer seminars and coaching on how to trade foreign exchange or get into property investment also don't need a license unless they purport to be offering a financial planning service.

But Mason said investors needed to be very wary of any claims made.

Some of those trading programmes do cost thousands of dollars and certainly do not tend to live up to the claims.

Liam Mason

Buying property directly does not come under the FMA but anyone pooling their money with other people into a property syndicate does.

Property syndicates are expected to have a license by the end of the year.

Mason said one thing a person could do to protect themselves was to take time to check out something properly before investing their money into it.

"One of the best things you can do is take time."

He said talking to other people about the potential investment was important as well as checking to see if the company offering it had a license.

Investors can check if a company or person is licensed through the FMA's website or the financial service providers register.

Companies that claim to have a license or registration but don't are also listed on the FMA website.

What to check before you invest
• The location of the provider - the FMA has more ability to help you if the business is in New Zealand

• The Companies Office website - does the business have a New Zealand director and does the company have the appropriate license for the financial product or service they provide?

• Be wary of Forex trading 'training' and 'tools' that promise a particular product or technique that gives access to better exchange rates or easy money. While software programmes and training courses can teach an investor how to make forex trades, no person or programme can ever accurately predict movement in foreign currencies. Property seminars also can make promises of no-fail wins on the property market.

•For a full list of who requires a license in order to do business in New Zealand click here.