The Financial Markets Authority (FMA) continues to dial-up the legal action with two new cases filed in the last week or so against general insurer, IAG, and an alleged rogue adviser.
In a rare criminal case, the regulator has accused former mortgage adviser, Prem Gounder, of submitting “a false document, namely a gifting certificate, in support of a home loan application made on behalf of a client”.
Margot Gatland, FMA head of enforcement, said in a release that the investigation into Gounder and the “conduct of persons associated with him” continues.
Among other entities, Gounder was associated with the Home Finance Company.
But in more familiar civil territory, the FMA added IAG to its court hit-list for self-confessed fair dealing breaches following a string of multi-million dollar fines squeezed out of several institutions over the last few years including Westpac and MAS (formerly, Medical Assurance Society).
Like MAS, the general insurer reported policy pricing issues to the regulator but, nevertheless, faces formal civil proceedings over 11 “alleged breaches” resulting in “false or misleading representations”.
The FMA says IAG mispricing that dates back to the dawn of the Financial Markets Conduct Act in 2014 saw the insurance company pocket $31.1 million after overcharging customers a total of $35 million.
Margot Gatland, FMA head of enforcement, said in a release: “IAG’s exemplary conduct in response to the FMA’s investigation must also be acknowledged. IAG’s self-reporting was followed by its very early admission of liability, and its full cooperation including its commitment to an undefended proceeding.
“IAG worked closely with the FMA by way of proactive assistance in support of the efficiency of the investigation, in addition to providing regular updates as to its full customer remediation and its significant system upgrades designed to prevent further breaches.”
Clawed-back legal expenses helped the FMA balance its books in the last financial year amid a sharp rise in spending.
According to the FMA 2024 accounts, annual revenue was significantly boosted by “cost recoveries from successful litigation cases that were not budgeted for at the time…, namely CBL, Kiwi Bank, Vero and Medical Assurance Society”.
The regulator has lobbied the government to lift its use-it-or-lose $5 million annual litigation allowance (that comes on top of general budget allocations), claiming the amount “is now insufficient” to cover FMA legal costs.
However, the FMA isn’t the only financial cop seeing a budget impact from its policing activities.
The Financial Times (FT) reported earlier this month that the UK regulator would cut fees paid by the industry for the first time after retaining a “record amount of money… from fines imposed in the past financial year”.
While the Financial Conduct Authority (FCA) forecast funding costs to jump 3.8 per cent to £783.5 million in the current financial year, the regulator also expects to lower fees for industry participants on the back of record retained fines from the previous accounting period of £70.5 million – money that would otherwise have been sent to government coffers.
Industry fees cover all of the UK regulator’s costs compared to over 80 per cent of the FMA budget (the remainder supplied out of general government revenue).
“The retained funds, which allow the FCA to recoup some of the enforcement costs incurred in the year in which the fines were collected, are used to provide a rebate on fees paid by regulated firms,” the FT reports. “After deducting the £70.5mn rebate expected from retained fines, the total fees due to be collected by the regulator are set to fall by about 1 per cent to £713mn — the first decline since shortly after it was created in 2013.”