The Financial Markets Authority (FMA) of New Zealand has cancelled the derivative issuer license of Rockfort Markets Limited, following a dismissed appeal in the High Court. The cancellation, effective July 19, 2024, comes after five years of regulatory scrutiny and failed attempts at compliance.

New Zealand Regulator Cancels Rockfort Markets' Derivatives License After Failed Appeal

Justice Edwards of the High Court upheld the FMA's March 2023 decision to cancel Rockfort's license, citing multiple material contraventions of license obligations. The court found that Rockfort had breached at least eight of its license conditions, including failure to comply with a previous FMA Direction Order and inadequate systems for ensuring compliance with advertising regulations.

“Removing a market license is one of our most significant interventions,” said Liam Mason, FMA General Counsel. “The serious and widespread nature of the contraventions, combined with Rockfort's compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term history and lack of improvement following earlier actions, led us to conclude that Rockfort is not fit to hold a license.”

Rockfort's troubles began as early as 2019 when the FMA first raised concerns about potentially misleading advertising. Despite repeated engagements with the regulator, Rockfort failed to fully address these issues.

The company provides clients with trading services in FX/CFD and offers access to stocks through the RockGlobal brand.

What the FMA Accuses Rockfort Of

One of the more serious breaches involved Rockfort's product disclosure statement, which lacked mandatory information about hedging counterparties. This omission was deemed materially adverse from an investor's perspective, potentially impacting their ability to assess the risks associated with Rockfort's products.

The court also found that Rockfort had failed to maintain the same standard of capability, governance, and compliance that it had demonstrated during its initial license application. For seven months, the company operated with only one director instead of the required three, leading to significant governance issues.

Rockfort had argued that its breaches were not material and that a more lenient regulatory response would have been appropriate. However, Justice Edwards dismissed these arguments, noting the company's history of non-compliance and the FMA's escalating interventions over time.

The FMA has imposed additional conditions on Rockfort and requested that the company close out its remaining open derivatives contracts with customers ahead of the license cancellation. This move aims to protect investors and ensure an orderly wind-down of Rockfort's derivatives business.

New Zealand’s FMA seems to follow in the footsteps of its Australian counterpart and is seeking consultation on making derivatives safer for consumers. In June, it proposed a new law that would restrict the maximum leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term on CFDs to 30:1, similar to other developed markets, including Europe.