MR No. 2021 – 34
The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko – has formally censured Wellington-based financial services firm FoxPlan Ltd, after one of its nominated representatives provided services he was not permitted to give and other representatives offered services to clients they were not permitted to give.
Following a monitoring review in late 2020, the FMA found one of FoxPlan’s Auckland-based nominated representatives¹ 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) were 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 held out to clients that they were an AFA or financial planner. Separately, the FMA had reason to believe FoxPlan’s AFAs failed to comply with disclosure obligations - specifically, the need to provide retail clients with their primary disclosure statement (PDS), an important document to ensure a client understands the service they are receiving.
James Greig, FMA Director of Supervision, said: “This case reiterates that financial advice firms can be held liable for the actions of their financial advisers.”
At the request of the FMA, FoxPlan has undertaken a number of 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. FoxPlan has established an action plan and is currently implementing that plan to address the issues identified. FoxPlan has contacted affected customers who received an investment planning service from the nominated representative, including offering them a free review of their investment plan.
Mr Greig said: “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. 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.
¹ Under the FA Act, a nominated representative was an unregistered individual who was nominated by a Qualifying Financial Entity (QFE) to give the QFE’s clients limited types of financial advice on a narrow range of financial products.