After receiving more than 2,000 complaints since July 2014, the Financial Markets Authority (FMA) is warning investors to step inside the regulatory tent for their own protection.

Financial products and services from outside the perimeter of regulation are being offered to investors who are not realising the consequences. More than half of all complaints received were related to scams, or money being lost to – or withheld by – unregistered or unlicensed companies, some of which are offshore.

Often, the companies involved offer ‘big win’ products such as forex trading services, investment schemes, property seminars and forex training software.

The FMA remains focused on identifying any individual or entity that is operating in New Zealand without a licence or authorisation, where that is required by law. A number of these companies, however, are overseas operations which they will not be alerted to until a local investor has a problem with them. And, outside local jurisdiction, the FMA generally can’t help people to recover funds or take legal action.

Liam Mason, director of Regulation, says “The Financial Markets Conduct Act has determined what products are regulated and it has strengthened the powers we have over the providers’ conduct. Unfortunately we recognise there will always be businesses that deliberately set up outside our jurisdiction and still manage to entice New Zealand investors to use their services.”

The FMA’s response to this has been to alert the public when it is concerned with an individual or business by issuing warnings on their website and, in some cases, strongly recommending against investing with these companies.
“For example Forex trading is considered a high risk, complicated investment and so we recommend consumers protect themselves as much as possible when contemplating this – or indeed any – investment. Do some research and take advantage of the Financial Markets Conduct Act and the protections it offers the investor,” says Mr Mason.
While some financial products and services are offered by legitimate firms who do not require a New Zealand licence, when contemplating any involvement in a financial product or service the key things an investor should check are:

• 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 licence 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 licence in order to do business in New Zealand, see Who needs a licence section. For broader consumer information and guidance, please visit Investment basics section.