FMA appeals breach of natural justice ruling over Vivier deregistration

Wednesday 10th February 2016

The Financial Markets Authority has appealed a High Court ruling that it breached Vivier & Co's rights to natural justice by failing to provide the firm with detailed evidence for the decision to remove it from the Financial Services Providers Register.

The market watchdog removed Vivier, which counts one time political operator Luigi Wewege as a director and chief executive, from the register last year because it didn’t believe the company was providing services in New Zealand. Vivier successfully appealed its deregistration in the High Court last September, arguing the FMA only began to investigate the firm after a member of the public passed on an Interest.co.nz online news article, linking the firm to sub-prime mortgages in Ireland.

In the notice of deregistration, the FMA didn’t mention the article, which Justice Timothy Brewer found in his High Court ruling was a breach of natural justice.

In the Court of Appeal this morning, counsel for the FMA Mary Scholtens QC reiterated the watchdog's position that the article had not been the driving force behind the move to deregister Vivier. The FMA denies the deregistration was as a result of the article, although it accepts that it was tipped off that the Department of Internal Affairs was no longer overseeing Vivier under anti-money laundering and countering financing of terrorism legislation.

Further investigation, including a site inspection of the Auckland offices by the Ministry of Business, Innovation and Employment, showed little evidence of activity in the office other than some administrative work.

Scholtens cited another High Court decision from December, which upheld the deregistering of Pakistani-owned foreign exchange firm Excelsior Markets. In that case, Justice Gerald Nation accepted the FMA's decision to remove Excelsior was justified because "most, if not all" of its financial services were provided outside New Zealand.

The FMA has powers to direct the registrar to remove companies where it is likely they are giving a false or misleading impression about the extent to which they are regulated in New Zealand. It’s concerned some offshore companies may be trying to take advantage of New Zealand’s reputation as a well-regulated jurisdiction.

When the FMA began investigating, it wrote to Vivier to ask for evidence about their operations in New Zealand and abroad, and to ask about their compliance with international regulation, Scholtens said.

Vivier's response was "very belligerent and negative" said Justice Anthony Randerson, one of three justices hearing the appeal along with Stephen Kos and Helen Winkelmann. Randerson said Vivier's accusation that the FMA had acted illegally, threatening the regulator with malfeasance action, was "like assaulting a police officer."

Vivier counsel Andrew Riches said Vivier's response had been aggressive, but the FMA's letter had been too general, and the month given to Vivier to respond wasn't long enough.

Justice Kos said Vivier could have given the FMA what available information they had, and asked for more time if necessary.

The judges questioned Riches about why Vivier had not filed financial documents for the year leading up to the FMA's enquiry. Riches said the company was on hiatus, which Justice Kos said contradicted the company's website where it claimed to have been providing financial services for the past 15 years.

In his response today, Riches said the Interest.co.nz article was defamatory, containing allegations of fraud and tax evasion by Vivier, and at no point had the FMA disclosed it was acting on the basis of the article, thus not giving Vivier an opportunity to respond.

"An investigation on that basis is heavily clouded," Riches said. "It's impossible for the decision-maker to be independent of the defamatory article."

The appeal continues.

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