Businesses
providing financial services without a local client base could still use New
Zealand registration as a “flag of convenience” but only under strict
circumstances, the Court of Appeal ruled.
The court upheld a Financial Markets
Authority decision to remove Vivier & Co Ltd from the register of financial
service providers. Vivier created a
false and misleading appearance of the extent to which it was regulated by New
Zealand law, the court ruled. This
damaged the integrity and reputation of New Zealand’s financial markets.
The Financial Markets Authority
investigated Vivier after receiving an anonymous tipoff that the company had
been accused in the Irish media of tax fraud and money laundering. A visit to Vivier’s Auckland office identified
one bored employee performing only minor administrative duties. Vivier had no New Zealand clients. Most clients appeared to be resident in
Europe, primarily Spain. Vivier’s
website highlighted its New Zealand registration as a financial service
provider, displayed the Financial Markets Authority’s logo and implied,
incorrectly, that the Authority supervised its activities. The Financial Services Providers
(Registration and Dispute Resolution) Act does not regulate market activity. Other financial regulation applies only to
financial providers with New Zealand clients.
The court was told Vivier had five directors (two resident in Ireland,
one in Italy and two in New Zealand) with a single New Zealand-based
shareholder.
Amending 2014 legislation deals with
“flag of convenience” registration by financial providers based in New Zealand
but not providing financial services within New Zealand. To avoid de-registration, these businesses
would need to make a special case to the Authority, said the court. Those with only off-shore clients need to
prove they are complying with the rules applicable to these off-shore markets
and they are not to advertise themselves as being supervised by any New Zealand
regulatory authority.
Financial
Markets Authority v. Vivier – Court of Appeal (13.05.16)
16.082