FMA prevents CLSA Premium NZ Limited from offering derivatives to retail investors

The Financial Markets Authority (FMA) has imposed conditions on the derivatives issuer licence of CLSA Premium New Zealand Limited (CLSAP NZ) that prevent the firm from making an offer to, or receiving further funds from, retail investors in relation to derivatives, except in certain limited circumstances.

The FMA has found that CLSAP NZ failed to meet some of its audit and assurance obligations for 2019 and it is not confident the firm will be able to meet those obligations in the near future. These obligations include:

a) Section 461D of the Financial Markets Conduct (FMC) Act 2013: Financial statements must be audited;

b) Section 461H of the FMC Act: Lodgement of financial statements;

c) Regulation 248 of the FMC Regulations: Assurance engagement;

d) Condition 11 of the Standard Conditions for Licenced Derivatives Issuers: Financial Resources – Audit requirements (requirement to provide Assurance Report and NTA Report)

The FMC, its associated regulations and the standard conditions for derivatives issuer licences impose annual audit and assurance obligations on derivatives issuers. These obligations include requirements that derivatives issuers lodge financial statements and obtain an assurance engagement by a particular time, and that those financial statements are audited.

The FMA is concerned that CLSAP NZ does not currently meet all of the eligibility criteria for being issued with a derivatives issuer licence.

The conditions that the FMA has imposed allow CLSAP NZ to close out open positions with retail investors, or receive funds from retail investors for the purposes of meeting obligations (e.g. margin or collateral requirements) that the investor might have with CLSAP NZ.

The conditions will remain in place until such time as the relevant, compliant audit and assurance reports for 2019 are lodged, and the FMA is satisfied that the criteria for issuing a licence under the FMC Act are met.

CLSAP NZ, formerly KVB Kunlun New Zealand Limited, is the local subsidiary of the Hong Kong parent, CLSA Premium Limited.

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