New Zealand’s Financial Markets Authority (FMA) has censured Jarden Securities Limited for critical breaches derivatives issuer mandates by OM Financial Limited prior to their merger, the regulator announced on Thursday.
Jarden and OM Financials merged in March 2021 and the merged entity inherited properties, rights and liabilities, including OMF’s DI license. OMF was previously owned by NZ Capital Securities that brought the firm in November 2019.
The official announcement detailed that OMF transferred its own money into the account meant to hold clients’ funds between September 2015 and July 2020. It made around 150 payments totaling $1 million. OMF self-reported the breaches to the regulator in September 2020.
The FMA mandates DIs to segregate company money from clients’ funds. Though they can deposit money into the trust account to safeguard against the risk of a shortfall, OMF used the deposited funds for making business-related payments to third-party providers.
Clients’ Funds Are Safe
“Although no OMF clients lost money as a result of this issue, we considered that investor money was at risk while the necessary separation processes were not in place,” said James Greig, FMA Director of Supervision.
“The breaches warranted a public censure due to the significant period over which they occurred, as well as the value and number of transactions.”
Earlier this week, the FMA also censured Auckland-based Firma Foreign Exchange Corporation (NZ) Limited for multiple violations as a regulated derivatives issuer.
“While we acknowledge that OMF self-reported these issues to us, managing client money in accordance with the regulations is a fundamental, minimum requirement for any licensed derivatives firm. In these circumstances, the self-reporting of the issues is expected and does not prevent the FMA from taking action and using our regulatory tools to hold firms to account. Jarden has engaged constructively with the FMA through this process and implemented changes to ensure this issue doesn’t happen again,” Greig added.
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