Liam Mason, head of valuation and oversight at the Financial Markets Authority (FMA), hit back at claims that regulatory information-gathering tactics are becoming increasingly coercive.
As reported last weeklaw firm DLA Piper, is a financial services firm after clients reported a surge in the use of “Section 25” notices, which require recipients to provide all requested information to regulators. warned to prepare for a tougher approach from the FMA.
Based on figures provided by the FMA, the number of Section 25 issuances increased from 140 in 2019 to 222 in calendar year 2022, a 60% increase.
At the same time, the number of basic FMA investigations utilizing Article 25 increased from an estimated 38 in 2019 to 48 in 2022. Regulators typically send multiple requests for information as the case evolves.
The number of both Article 25 notifications and related matters remained broadly stable from 2021 to 2022.
“We haven’t seen a significant increase in the use of these notices in recent years,” said Mason, who also serves as FMA General Counsel.
Since 2019, regulators have taken on more regulatory responsibilities under the new regime, which entered into force in 2021 (moved from transitional phase to fully licensed in March of this year), including broad oversight of the financial advice sector.
He also refuted DLA Piper’s view that Section 25 notices are usually accompanied by a secrecy order, subjecting recipients to strict secrecy measures with criminal penalties. bottom.
The FMA silenced six cases in 2019, doubling to 12 last year (i.e. a quarter of the investigations during this period).
“Secrecy orders are most often issued by the FMA in connection with a particular investigation,” Mason said. “These orders make confidentiality important to preserve the integrity of an investigation, such as where confidentiality is particularly necessary to protect accusers and witnesses in connection with the case, or where there is a risk. It is used in the case of “tainting or unintentional tainting of evidence between witnesses, or intentional collusion between witnesses.” ”
He said regulators generally use their Section 25 powers to gather evidence in specific cases of suspected violations, or to “thematically scrutinize” industry practices such as recent large investor exclusion investigations. He said that he is supporting “reviews”.
“We do not routinely use Section 25 notices to supervise licensed companies,” Mason said, “because we rely on cooperation from those companies under the terms of the license.” said. “However, in some circumstances, this work may still require the use of Section 25 notices. A small number of Section 25 notices are also used to obtain information on behalf of foreign regulators.”
Regulators may also consider the confidential status of information, deadlines for complying with requests, the need for “full access” to documents, and determinations that individuals are “unlikely to voluntarily provide information” and other Article 25 It has internal guidelines for exercising authority. foundation”.
Mason said the guidelines “require FMA officials to consider whether a voluntary request for information is appropriate in the circumstances before issuing a Section 25 notice.”
“These guidelines also indicate that it may be more appropriate for the FMA to seek a search warrant when there are real concerns about maintaining the integrity of an investigation, such as the real risk of failure to notify. Get the information,” he said.
But Mason said that while Article 25 and confidentiality clauses “could pose challenges” for boards and management, feedback so far suggests the problems are idiosyncratic rather than systematic. said that
“It has been our experience that when concerns are raised, they are very contextual, so we have not attempted to provide general guidance on this matter,” he said. We didn’t have one, but we may provide it in the future if needed.”
https://investmentnews.co.nz/investment-news/regulator-defends-info-gathering-trends/?utm_source=rss&utm_medium=rss&utm_campaign=regulator-defends-info-gathering-trends Regulator defends information-gathering trends | New Zealand investment news