The
Financial Markets Authority (FMA) of New
Zealand has cancelled the derivative issuer license of Rockfort Markets
Limited, following a dismissed appeal in the High Court. The cancellation,
effective July 19, 2024, comes after five years of regulatory scrutiny and
failed attempts at compliance.
New Zealand Regulator
Cancels Rockfort Markets’ Derivatives License After Failed Appeal
Justice
Edwards of the High Court upheld the FMA’s March 2023 decision to cancel
Rockfort’s license, citing multiple material contraventions of license
obligations. The court found that Rockfort had breached at least eight of its
license conditions, including failure to comply with a previous FMA Direction
Order and inadequate systems for ensuring compliance with advertising
regulations.
“Removing
a market license is one of our most significant interventions,” said Liam
Mason, FMA General Counsel. “The serious and widespread nature of the
contraventions, combined with Rockfort’s compliance history and lack of
improvement following earlier actions, led us to conclude that Rockfort is not
fit to hold a license.”
Rockfort’s
troubles began as early as 2019, when the FMA first raised concerns about
potentially misleading advertising. Despite
repeated engagements with the regulator, Rockfort failed to fully address these
issues.
The company
provides clients with trading services in FX/CFD and offers access to stocks
through the RockGlobal brand.
What the FMA Accuses
Rockfort of
One of the
more serious breaches involved Rockfort’s product disclosure statement, which
lacked mandatory information about hedging counterparties. This omission was
deemed materially adverse from an investor’s perspective, potentially impacting
their ability to assess the risks associated with Rockfort’s products.
The court
also found that Rockfort had failed to maintain the same standard of
capability, governance, and compliance that it had demonstrated during its
initial license application. For a period of seven months, the company operated
with only one director instead of the required three, leading to significant
governance issues.
Rockfort
had argued that its breaches were not material and that a more lenient
regulatory response would have been appropriate. However, Justice Edwards
dismissed these arguments, noting the company’s history of non-compliance and
the FMA’s escalating interventions over time.
The FMA has
imposed additional conditions on Rockfort and requested that the company close
out its remaining open derivatives contracts with customers ahead of the
license cancellation. This move aims to protect investors and ensure an orderly
wind-down of Rockfort’s derivatives business.
The New Zealand’s
FMA seems to follow in the footsteps of its Australian counterpart and is
seeking consultation on making
derivatives safer for consumers. In June, it proposed a new law that would
restrict the maximum leverage on CFDs to 30:1, similar to other developed
markets, including Europe.
The
Financial Markets Authority (FMA) of New
Zealand has cancelled the derivative issuer license of Rockfort Markets
Limited, following a dismissed appeal in the High Court. The cancellation,
effective July 19, 2024, comes after five years of regulatory scrutiny and
failed attempts at compliance.
New Zealand Regulator
Cancels Rockfort Markets’ Derivatives License After Failed Appeal
Justice
Edwards of the High Court upheld the FMA’s March 2023 decision to cancel
Rockfort’s license, citing multiple material contraventions of license
obligations. The court found that Rockfort had breached at least eight of its
license conditions, including failure to comply with a previous FMA Direction
Order and inadequate systems for ensuring compliance with advertising
regulations.
“Removing
a market license is one of our most significant interventions,” said Liam
Mason, FMA General Counsel. “The serious and widespread nature of the
contraventions, combined with Rockfort’s compliance history and lack of
improvement following earlier actions, led us to conclude that Rockfort is not
fit to hold a license.”
Rockfort’s
troubles began as early as 2019, when the FMA first raised concerns about
potentially misleading advertising. Despite
repeated engagements with the regulator, Rockfort failed to fully address these
issues.
The company
provides clients with trading services in FX/CFD and offers access to stocks
through the RockGlobal brand.
What the FMA Accuses
Rockfort of
One of the
more serious breaches involved Rockfort’s product disclosure statement, which
lacked mandatory information about hedging counterparties. This omission was
deemed materially adverse from an investor’s perspective, potentially impacting
their ability to assess the risks associated with Rockfort’s products.
The court
also found that Rockfort had failed to maintain the same standard of
capability, governance, and compliance that it had demonstrated during its
initial license application. For a period of seven months, the company operated
with only one director instead of the required three, leading to significant
governance issues.
Rockfort
had argued that its breaches were not material and that a more lenient
regulatory response would have been appropriate. However, Justice Edwards
dismissed these arguments, noting the company’s history of non-compliance and
the FMA’s escalating interventions over time.
The FMA has
imposed additional conditions on Rockfort and requested that the company close
out its remaining open derivatives contracts with customers ahead of the
license cancellation. This move aims to protect investors and ensure an orderly
wind-down of Rockfort’s derivatives business.
The New Zealand’s
FMA seems to follow in the footsteps of its Australian counterpart and is
seeking consultation on making
derivatives safer for consumers. In June, it proposed a new law that would
restrict the maximum leverage on CFDs to 30:1, similar to other developed
markets, including Europe.
This post is originally published on FINANCEMAGNATES.
