NBR 20 Dec 2012 – FMA conflict of interest allegations misconceived and flawed

This appeared in the NBR in response to a complaint by the RAM investors group to the Solicitor General

FMA conflict of interest allegations misconceived and flawed

Article by Blair Cunningham  http://www.nbr.co.nz/subscribe?return=134177

The Financial Markets Authority (FMA) says it has fulfilled its statutory obligations amidst a conflict of interest complaint.

Ross Asset Management investors’ group has complained to the solicitor-general’s office of a perceived conflict of interest.

“FMA is not simply an investigatory and enforcement agency, but also has a statutory mandate to authorise and license market participants. It is inevitable the FMA will at times investigate and bring proceedings against entities it has previously licensed,” spokesman Tony Reid told NBR ONLINE in a written statement.

Investors’ group spokesman Bruce Tichbon says he got a “strong sentiment” from members of the group he should seek clarification of whether or not the FMA has a conflict of interest concerning RAM and related investigations.

He cited four major concerns:

• David Ross was licensed by the FMA as an Authorised Financial Adviser and David Ross had issued a disclosure statement to clients in mid-2011 stating this. The action of the FMA and this disclosure was instrumental in assuring many investors RAM was legitimate and had a more reasonable risk profile.The FMA was charged with doing due diligence on Authorised

• Financial Adviser’s, but had not investigated RAM.
• The government had passed major pieces of financial legislations since the finance company crashes of about 2008, including the Financial Advisers Act 2008 and the Financial Markets Act 2011. These actions created the impression of reasonable regulatory supervision and oversight of the financial markets, but this was not in fact the case, as evidenced by the collapse of RAM.
• The Securities Commission (the precursor to the FMA) was warned there was cause for concern about RAM three years ago in 2009, yet no action was taken.

Mr Tichbon has been referred to the Ministry of Business, Innovation and Employment and is currently considering his next steps.

“The FMA may now have a conflict of interest, in that it has failed to act on previous warnings but is now engaged in the investigation, receivership, liquidation of RAM and potential action against Authorised Financial Advisers who were involved,” Mr Tichbon says.

But Mr Reid says the FMA has applied the law “consistent with our mandate and discretion.”

Blair Cunningham – Wellington reporter

Dominion Post: Ross Asset Management failure spurs changes

Comment: Quote in article below:  “The FMA had no intelligence on executive chairman David Ross before his financial adviser authorisation. Little existed in his application to indicate he was a risk.”

Does this seem credible from the FMA, considering the authorities had been getting written warnings about David Ross 3 years ago? Further, the FMA taking his financial adviser application without questioning it has clearly helped lead to the disaster many of us now find ourselves in.

The government has a lot of work to do to restore confidence in the NZ finance markets, and to restore the credibility of the FMA. Statements like this seem to indicate a lack of integrity, judgement and direction.


Dominion Post: Ross Asset Management failure spurs changes
Last updated 05:00 10/01/2013

The collapse of suspected Ponzi scheme Ross Asset Management could prompt changes to legislation which treats Kiwis with $500,000 to invest the same as banks or professional investors.

Parliament is expected to pass the Financial Markets Conduct Bill later this year, which, Commerce Minister Craig Foss said, was “critical to restoring investor confidence in New Zealand’s financial markets”.

Read More