FMA pings adviser for unauthorised advice
Financial services firm FoxPlan has been publically censured by the FMA after five of its representatives were found to be offering services they were not permitted to give.
Wednesday, 28 July 2021
by Matthew Martin
However, the Financial Markets Authority (FMA) stopped short of taking court action against the firm saying an official public censure and remedial action taken by the firm would be an appropriate penalty.
According to the FMA's director of supervision James Greig, the Wellington-based firm was censured after it found one of FoxPlan’s Auckland-based nominated representatives had provided an investment planning service to some clients since mid-2018.
Under the Financial Advisers Act (FA Act) 2008, only Authorised Financial Advisers (AFA) are permitted to provide this service, which involves designing a plan based on an individual’s financial situation and identification of the individual’s investment goals.
Additionally, the FMA found four of FoxPlan’s representatives wrongly informed clients they were an AFA or financial planner, and the FMA had reason to believe FoxPlan’s AFAs failed to comply with disclosure obligations.
This being the need to provide retail clients with their primary disclosure statement, an important document to ensure a client understands the service they are receiving.
“This case reiterates that financial advice firms can be held liable for the actions of their financial advisers,” says Greig.
At the request of the FMA, FoxPlan has undertaken several actions to address the underlying issues around the management of the firm’s advisers and put in place measures to prevent similar misconduct in the future.
“A financial adviser providing a service they are not permitted to carry out is a considerable issue because it has the potential to lead to poor customer outcomes, such as the loss of funds from inadequate service," Greig says.
"New Zealanders put their trust and their families’ financial wellbeing in the hands of their financial advisers so it’s critical we can be confident an adviser is appropriately qualified for the services they provide.
“We considered FoxPlan’s breaches were significant enough to warrant a public censure but not sufficient to meet the threshold for court action.
"A public censure holds an entity to account while serving as an important reminder of firms’ obligations.”
The FMA was satisfied FoxPlan likely breached sections 17, 20A, 20B and 22 of the FA Act, which was repealed and replaced by the Financial Services Legislation Amendment Act (FSLA Act 2019) in March 2021.
The censure was made under section 75D(2)(f) of the FA Act.
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