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FMA directs Rockfort Markets to address misleading advertising

Page last updated: 24 March 2021

Media Release
MR No. 2021 – 12

The Financial Markets Authority (FMA) has directed licensed derivatives issuer (DI) Rockfort Markets to remove or amend misleading advertising statements on its social media channels and website.

The FMA became aware that certain statements in Rockfort’s Facebook advertisements, and on its website, created the impression that trading in derivatives was “safe” or had not presented a balanced view of the risks. In fact, trading in derivatives, and in particular CFDs (contracts for difference) offered by Rockfort as a DI, is inherently risky.

The FMA found Rockfort had other statements on its website that were likely to mislead investors or were unsubstantiated, including:

  • “We [Rockfort] exceed the requirements of the Legislation and keep separate client money from our operating money”, when keeping client money separate is a requirement of the legislative requirements for DIs, and
  • Rockfort is a licensed and regulated “forex and share broker”, when its licence is as a DI and these services are not licensed in New Zealand.

It is a requirement for advertisements of regulated financial product offers to include a prominent statement that a Product Disclosure Statement (PDS) is available. The FMA identified that certain Rockfort advertisements did not include this statement, and other advertising was inconsistent with the PDS.

The FMA considered that Rockfort’s materials were likely to breach the FMC Act, specifically the ‘fair dealing’¹ provisions and advertising requirements for regulated offers.

The FMA initially raised its concerns with Rockfort and the company took some steps to amend or remove its advertising materials, but the regulator considered its concerns were only partially addressed.

The FMA issued a direction order to Rockfort under s468 of the FMC Act, whereby the company was directed to remove or amend specified marketing materials.

The company must also ensure similar and future marketing materials:

  • clearly state (and do not underplay) the risks involved with derivatives
  • do not state that Rockfort exceeds regulatory requirements regarding the holding and application of investor funds
  • do not state that Rockfort is licensed or regulated by the FMA to provide services or products not covered under its DI licence
  • state that a PDS (Product Disclosure Statement) is available

Following the direction order, Rockfort has certified to the FMA that all its current advertisements have been removed or revised to comply with the order. The company must make another certification in three months that all its marketing materials comply with the direction order.

James Greig, FMA Director of Supervision, said: “Direction orders are an important part of our toolbox, enabling us to take quick action and enforce compliance. In this situation we considered an order and public statement was appropriate and proportionate, given our earlier engagement with Rockfort did not fully address our concerns. We have a range of options to deal with poor conduct and by naming the firm, we want to reinforce our expectations around misleading advertising materials, particularly in the high-risk derivative sector.”

“Derivatives are generally not a suitable investment for most retail investors. Derivatives issuers advertising to retail investors should not create the impression that derivatives are a ‘safe’ investment,” Mr Greig said.

In July last year, the FMA published a report on the derivatives issuer sector identifying key risks in the sector and highlighted future focus areas to improve sector compliance. The regulator is also considering industry feedback on its proposed guidance for advertising of financial products.

The FMA has information for investors about the complexities and risks of derivatives on its website here.

ENDS

 

Notes:

A direction order is a regulatory tool the FMA can use to direct a recipient to comply with the law and stipulate steps they must take by a given timeframe. The FMA can use direction orders when it is satisfied a person’s or company’s conduct has breached, or is likely to have breached, or is likely to breach in future, the FMC Act. The FMA’s regulatory response guidelines can be found here.

The FMA considered Rockfort through its advertising materials breached, or was likely to have breached sections 19, 23 and 89 of the FMC Act and that Rockfort was likely to breach these sections in the future.

¹ The ‘fair dealing’ provisions in the FMC Act prohibit:

  • misleading or deceptive conduct, including conduct which is likely to mislead or deceive;
  • false, misleading or unsubstantiated representations;

Media contacts:
Andrew Park
FMA Media Relations Manager
andrew.park@fma.govt.nz
021 220 6770

Campbell Gibson
FMA Senior Adviser, Media Relations
campbell.gibson@fma.govt.nz
021 945 323