FMA found not to have erred in deregistration of financial service provider
The Court of Appeal has allowed an appeal by the Financial Markets Authority (FMA) from the High Court’s decision that the deregistration of financial service provider, Vivier and Co Ltd, be quashed: Financial Markets Authority v Vivier and Company Ltd  NZCA 197.
The FMA’s power to direct the Registrar of Financial Service Providers to deregister a financial service provider and related power to direct the Registrar not to register a person, were new discretionary powers given to the FMA through 2014 amendments to the Financial Service Providers (Registration and Dispute) Resolution Act 2008.
Vivier and Co Ltd v Financial Markets Authority (2015) 11 NZCLC ¶98-035 had been the first case to consider the FMA’s new powers. The FMA had directed that Vivier be deregistered as a financial service provider. Brewer J in the High Court had found that there had been a breach of natural justice in the process followed by the FMA and that there had been insufficient evidential basis to exercise the power. Brewer J considered that the FMA should have specific evidence that Vivier’s registration was misleading to consumers or damaging to the reputation of New Zealand’s financial markets.
In a second case the High Court (Nation J) had upheld the exercise of the FMA’s direction to deregister Excelsior Markets Ltd, which, like Vivier, provided financial services almost wholly outside New Zealand: Excelsior Markets Ltd v Financial Markets Authority (2015) 11 NZCLC ¶98-038. Nation J had disagreed with Brewer J’s approach in relation to the evidence required to be considered by the FMA.
Court of Appeal
The Court of Appeal disagreed with the approach taken by Brewer J in Vivier and found that the FMA was not required to have evidence that the particular financial service provider’s registration was actually misleading. The FMA was permitted to draw appropriate inferences that a financial service provider’s registration may be misleading or harmful to New Zealand’s reputation. The Court found that the FMA was permitted to rely on general evidence or complaints relating to other financial service providers to reach a conclusion that it was not necessary and desirable to deregister Vivier.
The Court assessed the evidence before the FMA and found that the FMA had met the evidential threshold for deregistration. In agreement with Nation J in Excelsior the Court of Appeal found that the FMA was entitled to draw on its expert knowledge of financial markets in New Zealand and overseas. The Court considered that the FMA was in the best position to assess matters such as damage to the reputation of financial markets and whether registration would create a misleading appearance.
The Court of Appeal also found that the FMA did not breach natural justice by:
• failing to disclose the fact of receipt of the complaint about Vivier and a news article,
• failing to provide Vivier with further information about its reasons for seeking deregistration.
Nicky Won, editor New Zealand Company Law and Practice
Financial Markets Authority v Vivier and Company Ltd  NZCA 197.