Investor lodges complaint against FMA

• Tweet

None of the criteria that people must meet in order to become an authorised financial adviser are enough to catch out fraudsters, says one angry investor.

Monday, July 22nd 2013, 2:00PM 2 Comments

by Susan Edmunds

Barry Prince has complained to the ombudsman about the Financial Markets Authority in the wake of the collapse of Ross Asset Management.

The Kapiti businessman has been an investor with David Ross since 2011.

He said the FMA did not perform its statutory obligations and wanted the ombudsman to determine whether the FMA had carried out the necessary checks on Ross before he was approved to become an AFA.

Prince said the fact that Ross was an approved AFA was one of the factors that made him think his investment was safe with him.

He said he assumed that when the FMA said one of its primary objects was to make sure the sharemarket was acting in a fair way, that would mean checks were being done to ensure all participants were honest. “They said if you lose money through investments it’s like losing on a horse race, but this is a bit like the TAB being crooked. If you lose money through bad investments that’s one thing but if they’re a crook, that’s another.”

He said the FMA should have checked Ross out when he applied for AFA status, not when complaints were made.

Prince said there were no questions in the AFA application document that would force an adviser to do due diligence on themselves.  “It also allows people to practice who don’t have an independent audit, they audit themselves. How ridiculous is that?”

The FMA itself has said there is little it can do to turn down would-be applicants.  Outgoing chief executive Sean Hughes wrote to Commerce Minister Craig Foss, saying that the entrance criteria should be stricter. Advisers can only be turned down on the basis of good character or criminal convictions.

Prince said the FMA was partly responsible for investors’ Ross losses. “The main accountability is with the crook himself but if they had picked him up as they should have done when he applied, for all the people who invested after that date, millions of dollars would be safe. They should be protecting people at the top of the cliff by vetting applications when people apply. This is something that should not have happened with an organisation that’s set up to safeguard the markets.”

An FMA spokesman said the first it heard of the complaint was through the media.  "There are statutory compliance requirements to become an Authorised Financial Adviser (AFA) and FMA must grant AFA status to any applicants who meet the legal criteria."

He said Ross had no criminal convictions, met the competence requirements in the Code of Professional Conduct, and testimonials about him were supplied from INFINZ and a client who had been with him for 10 years. "Ross did not identify any issues of concern in his application."

The FMA laid three charges against Ross in June, alleging breaches of financial markets legislation. It claims he made a false or misleading declaration or representation to the FMA for the purpose of obtaining AFA authorisation.

Comments from our readers

Sign In to add your comment