Pegasus Markets found guilty of abusing New Zealand’s Financial Service Providers Act

Maria Nikolova

New Zealand’s FMA charged Pegasus after the company stated on two different websites that it was registered on the Financial Service Providers Register, despite it being deregistered.

Online trading firm Pegasus Markets Ltd and its New Zealand-based director, Michael Reps, have been found guilty of all criminal charges brought by the Financial Markets Authority (FMA) for breaches to the Financial Service Providers (Registration and Dispute Resolution) Act (FSP Act).

The regulator charged Pegasus and Mr Reps after the company stated on two different websites that it was registered on the Financial Service Providers Register (FSPR), although it was deregistered. Pegasus was subsequently warned by the Companies Office about the misleading statements but did not remove the statements.

In the North Shore District Court, Judge Jelas found Pegasus guilty of two charges of breaching section 12 of the FSP Act, which states that no one can purport to hold out as registered on the FSPR unless they are registered on the FSPR and a member of an approved dispute resolution scheme.

New Zealand-based Mr Reps was also found guilty of breaching section 40, for knowingly failing to prevent Pegasus from committing an offence under the Act.

Each charge for breaching section 12 of the FSP Act carries a maximum fine of $300,000 for a company and a maximum penalty of either a $100,000 fine and/or 12 months’ imprisonment for an individual.

The sentencing of Pegasus and Mr Reps is scheduled for November 6, 2020.

Registration on the FSPR does not necessarily mean that an entity is regulated by the FMA, the regulator explains. However, individuals and businesses have sought to use registration as a way to establish legitimacy, and then use this to target overseas investors, exploiting New Zealand’s reputation as a well-regulated country.

The FMA has used its powers under the FSPR Act to direct the Registrar to deregister companies from the FSPR.

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