The FMA has a variety of enforcement options available to address false, misleading, deceptive or confusing behaviour. The action taken will depend on the severity and level of misconduct.
For example, there may be instances where engagement through dialogue is sufficient to address a breach. Alternatively, this may extend to formal feedback letters, monitoring reports, issuance of a public warning, direction order or stop order.
A stop order, which is required to be published (see here for an example), can be issued in some circumstances where the spread of information is likely to confuse investors on material matters (i.e. matters which would influence a reasonable investor’s decision to invest in the financial product or obtain financial services). It prohibits the issuer from continuing the relevant activity to protect investors and the integrity of the market. For example, the FMA can issue a stop order to prevent or stop the issuer of a financial product from:
- distributing the PDS, other disclosure document or advertisement (including keeping its website up);
- continuing to offer the financial product;
- accepting applications or deposits from customers for the financial product.
Failure to comply with a stop order can result in a fine of up to $300,000.
If the FMA considers that it is in the public interest to do so, it may issue an interim stop order whilst it considers the grounds for a stop order.
More egregious breaches may result in the FMA taking court action.
The fair dealing provisions are civil liability provisions. This means the courts have the discretion to issue civil liability orders, such as a pecuniary penalty order or compensatory order, for a breach of a fair dealing provision. In addition, civil liability orders can be made against not just the person in contravention, but also against those involved in the contravention. The aim is both to sanction the issuer for its misleading conduct and, where necessary, to seek redress for affected parties.
For more information on the enforcement options available to the FMA, please refer to our Regulatory Response Guidelines.