The leading investment firm Jarden Securities is the latest to fall victim to a crackdown on breaches of rules by the Autorité des marchés financiers.
The company has been censored by the authority for mixing investor money from derivatives trading with its own – known as co-mingling.
The rule violations were committed by niche investment firm OM Financial, which First NZ Capital, subsequently renamed Jardens, acquired in 2019. OMF was incorporated into Jardens’ larger operations earlier this year.
FMA supervisory director James Greig said segregation of funds was a fundamental obligation for derivatives issuers and any breach was serious.
“We have little tolerance for companies that do not meet their obligations in this area.”
“Although no OMF client lost any money as a result of this issue, we considered investor money to be at risk when the necessary separation processes were not in place. The violations warranted public censorship because of the significant time frame in which they occurred, as well as the value and number of transactions, ”said Greig.
The OMF transferred around $ 1 million of its own money to a trust account, which held investors’ funds in the event of a shortfall in settling transactions.
Greig said the money OMF deposited was for commercial payments to third-party vendors, not to guard against the risk of lost profits.
OMF reported the violations itself, which took place over a five-year period, and changes were made to ensure this does not happen again.
Earlier this week, the FMA criticized small derivatives trader Firma Foreign Exchange Corporation for not holding minimum levels of assets and for failing to verify if its clients knew what they were investing in.
The authority has also tightened the way financial services firms advertise to ensure they don’t mislead or deceive investors.