New Zealand's financial markets watchdog has cancelled a company's transitional financial advice provider (FAP) licence for the first time.
The Financial Markets Authority, Te Mana Tātai Hokohoko, (FMA) today announced it has stripped the FAP of Wisdom House Investment Partners Limited, after its sole financial adviser engaged in serious misconduct at his previous employer.
Wisdom House, which has its registered office in Auckland, is solely operated by Yuen Pok (Paul) Loo.
He established the business after his contract was terminated by Wellington-based financial services firm FoxPlan Ltd, which was censured by the FMA in July 2021 because, among other breaches, Loo as one of its nominated representatives provided services he was not permitted to give.
Loo's misconduct at FoxPlan, the FMA said, included telling clients he was an authorised financial adviser when he was not. He also was found to be invoicing people for advice using altered FoxPlan invoices, resulting in the firm's clients paying him directly – resulting in $36,029.98 being misappropriated from FoxPlan between July 2018 and November 2020.
Loo, who has returned the misappropriated money, further wrote investment plans for clients which had not been approved or signed-off by the firm.
The FMA said it was not aware of any clients suffering a financial loss because of his misconduct, which was discovered during an FMA monitoring review of FoxPlan.
FoxPlan considered Loo had breached his agency agreement and the firm's internal policies, which led to his contract being cancelled immediately.
The FMA said it was satisfied, because of Loo's misconduct and the FMA's enquiries, that Wisdom House's transitional financial advice provider licence should be cancelled. The licence was cancelled on December 10.
Loo did not dispute the facts, acknowledged his misconduct and showed remorse, the FMA added. Despite this, the government agency determined Loo did not adequately address the regulator's concerns and is not a fit and proper person to hold the position of director or senior manager.
Loo is informing his clients and affiliated product providers of the licence cancellation, the FMA said.
In addition, the FMA concluded Wisdom House is likely to contravene its licensee obligations in the future because Loo is the sole director and adviser.
"Trust in the financial advice sector is imperative and any misconduct that undermines that must be held to account," FMA director of supervision James Greig said.
"A licence cancellation is a strong regulatory response and we decided it was necessary in this case to send a strong message of deterrence."
From the start of the new financial advice regime on March 15 this year, anyone who gives regulated financial advice to retail clients must either hold, or operate under, a FAP licence.
There are two phases to the licensing process full and transitional, which also took effect from March and are valid for up to two years.