Rogue financial advisers face clampdown by FMA

New rules due to come into effect this year will require that a company registering on the FSPR must have at least one New Zealand resident director. Photo / Thinkstock

The Financial Markets Authority (FMA) is moving to stop rogue financial services providers from abusing New Zealand registration.

Twenty three overseas-based companies have been removed from the New Zealand Financial Service Providers Register (FSPR), following complaints by consumers, some of whom have lost money.

Another 20 overseas companies have been refused registration since July last year.

The companies have been shirt-tailing on New Zealand's regulatory reputation to garner credibility with consumers.

The FSPR has come in for criticism from the financial services industry because it has been too easy to get registration and once registered, individuals and companies have been suggesting that registration is akin to regulation and/or being authorised.

Rod Severn, chief executive of the Professional Advisers Association, told the Financial Services Complaints conference in Auckland that the bar to entry of the FSPR needed raising. "I could be driving a bus today and in a couple of weeks be a registered financial adviser".

Simone Robbers, director of primary markets and investor resources at the FMA said that the FSPR was "not the holy grail" and that there had been abuse of the register, especially by overseas-based foreign exchange companies. "We have very little power with overseas providers," she said.

Robbers said that simply being on the FSPR was no guarantee that the company was bona fide and that investors needed to "make sure there is a presence here" before investing.

The process of deregistration can be lengthy because the companies have the right to submit reasons why they should stay on the register. The FMA says, however, that from now on it will be releasing the names of those companies that have not replied within five days - in order to protect consumers.

New rules due to come into effect this year will require that a company registering on the FSPR must have at least one New Zealand resident director.

Meanwhile, Robbers said the FMA was concerned that the public didn't understand what the title Registered Financial Adviser (RFA) meant. RFAs sell basic financial services such as mortgages, and insurance.

"The RFA is not a qualification. It is a registration. It is not a level of professionalism or a suggestion they have a minimum qualification," says Robbers.

Robbers said the FMA had dealt with property services in particular that had been mis-using the RFA title, inferring that it was a qualification.

An issues paper for the review of the Financial Advisers Act, due to be released later this month, is expected to look at the issue.