The Financial Markets Authority (FMA) - Te Mana Tatai Hokohoko - has censured Christchurch-based financial services firm Opes Group Holding Company Limited (Opes) for failing to comply with a number of obligations under its Financial Advice Provider (FAP) licence.
FMA Executive Director for Response and Enforcement Louise Unger said: "We made the decision to censure Opes because there were shortcomings in its record keeping, how it ensures client understanding of the advice, its management of conflicts of interest and oversight of its advisers.
"The way Opes' client documents are completed, how they are stored, and the level of detail recorded is not consistent, and records weren't efficiently accessible, to the extent that Opes was in breach of the requirements of Standard Condition 1 of its FAP licence. In addition, this breach made it difficult for FMA to verify whether other regulatory obligations were being met.
"There were additional reasonable steps that Opes could have taken to ensure its clients who did not progress to purchase a property with Opes understood the risks and limitations of the advice provided. Clients who did not proceed through the full advice process with Opes, where they would have received further risk disclosures, may not have been made fully aware of the potential downsides or the implications of acting on limited advice.
"The firm is vertically integrated - combining property sales, investment planning, mortgage advice, and accounting and property management. While this offers integrated services, the business model creates a risk of conflict of interest between the financial advice provider and the client, making adequate policies and procedures in this area, and the implementation of them, critical to appropriately managing this risk. The FMA found that Opes did not have adequate policies or processes in place and could not be confident that all conflicts had been identified, disclosed, and managed.
"Opes acknowledged that its regulatory compliance, policies, procedures and staff adherence to policies had not kept pace with its rapid growth and were not fit-for-purpose for the business. It has acknowledged the FMA's view that there has been a gap between Opes' compliance with its FAP obligations and where it actually needs to be.
"While no actual client harm was identified by the FMA's review, we consider that these contraventions have the potential to increase the risk of detriment to customer outcomes. Censuring and naming Opes is important to ensure the transparency of FMA decision making; it informs the public and previous clients, prevents and reduces the opportunity for consumer detriment, and helps to maximise the deterrent effect on the industry.
"Opes has cooperated fully with the FMA, has already taken significant steps to address concerns raised by the FMA and has provided a voluntary remediation plan for further improvements it intends to make. If fully implemented, FMA considers these proposed actions will go towards ensuring Opes complies with its obligations going forward."
The FMA noted Opes' cooperation, significant efforts to remedy the contraventions, and ongoing commitment to improving policies and practices.
Ends
