The Financial Markets Authority (FMA) has booked another multi-year court battle after launching civil actions against InvestNow last week over historic, previously remediated, alleged anti money-laundering (AML) breaches.
InvestNow joins Booster on the FMA legal hit list. The regulator served Booster with papers in June accusing the KiwiSaver and investment manager of 75 governance failures in relation to its private asset fund, Tahi.
Both the Booster and InvestNow court dates are likely a couple of years away as the parties line-up legal arguments.
The FMA issued a formal warning to InvestNow in September 2022 – followed up by remedial actions – but subsequently “concluded that the extent of InvestNow’s non-compliance warrants the commencement of civil proceedings”.
In a release, InvestNow says it “met every deadline the FMA imposed and complied with all requests and required remediation actions”.
“The claim outlined in the FMA announcement relates to events between 2018 and early 2022 that were addressed in a public formal warning released by the FMA in 2022,” the statement says.
“InvestNow fully complied with all actions the FMA required of it in response to that formal warning.”
The FMA has pinged more than 10 entities over AML breaches, issuing warnings to – among others – Craigs Investment Partners, Sharesies, CLASP NZ and Tiger Brokers.
Tiger and CLASP both also folded in follow-up civil cases, admitting to respective FMA charges to cop respective fines of $900,000 and $770,000 instead of taking the – possibly more expensive route – of mounting arguments in court.
The regulator is also seeking a “pecuniary penalty” in the InvestNow case.
In the wake of several recent court wins – often achieved without a fight – the FMA recorded a surplus in the 2023/24 financial year.
The 2024 FMA annual report shows the regulator pulled in ‘other’ revenue of $3.3 million compared to the budgeted $444,000 “due to one-off cost recoveries from successful litigation cases that were not budgeted for at the time of SPE, namely CBL, Kiwi Bank, Vero and Medical Assurance Society”.
Meanwhile, the government has embarked on an overhaul of the AML rules including a move to appoint the Department of Internal Affairs as the sole regulator – relieving both the Reserve Bank of NZ and the FMA of duties in the famously fraught anti money-laundering regime.
The InvestNow action rounded-off a busy end-of-year punishment spree by the FMA that also saw Pathfinder ticked-off for a couple of fossil fuel faux pas in advertising materials and a guilty plea from former Heartland Bank accountant, Kevin Young, over insider trading charges.
Furthermore, in its final monthly update for 2024 published last week, FMA chief, Samantha Barrass, said the regulator had “taken time to consider the industry’s early 2024 response to our consultation on fair outcomes”.
As reported last week, documents obtained under an Official Information Act (OIA) request show most submitters and the new government had deep concerns about the ‘outcomes-focused’ model as proposed by the FMA last November.
Post the OIA request, the regulator has since published the full 50 submissions on the outcomes proposal.
Barrass says the draft outcomes-focused guidelines released in November 2023 “were intended to help to explain how we intend to prioritise and carry out a more forward-looking approach to regulation”.
“I assure you they will not be new rules.”
However, the December FMA update notes that it “would be beneficial” to clarify the proposals.
“We intend to publish this in 2025.”
The end-of-year FMA summary also says almost all institutions captured by the Conduct of Financial Institutions (COFI) legislation have either received or applied for a licence ahead of the regime start date at the end of March next year.
However, Michael Hewes, FMA director deposit-taking, insurance and advice, says in the update that there are “a very small number who are not engaging with us, risking being unlicensed by 31 March, and therefore unable to provide their service to their New Zealand customers”.