A quick snapshot of complaint activity for the 12 months ended 30 June 2015

Whilst total activity was down on the 2014 year, total registered enquiry and complaint cases increased over this reporting period.

Of the 2,919 registered enquiries, FDRS recorded 475 complaints. 370 of those were referred back to the member’s complaints process.

Of the balance, 84 complaints escalated to the FDRS formal disputes process and 59 of those were resolved, 36 by early resolution, including two conciliation settlements. 23 disputes were resolved at adjudication. Of those 16 complaints were upheld.

Since year end many of the complaints referred back to members have deadlocked and escalated to the scheme’s formal disputes process. 

One of the conciliated settlements concerned a party alleging his financial planner failed to follow instructions about swithcing a KiwiSaver provider.The other settlement was over amount of an insurance settlement.

Sixteen of the adjudicated decisions related to offshore owned on line forex or investment platforms; seven were about New Zealand providers-one of those about a now liquidated money transfer operator; two about insurance companies and two about finance companies. No advisers had disputes that escalated to the adjudicator.

Systemic issues

At 82% of total registered complaints, the prevailing systemic issue was “failing to follow instructions”. Specifically the providers,-all on line forex or investment platforms-did not respond to requests from their customers to reimburse investments. These complaints inevitably resulted in deadlock (predominantly because the provider failed to engage) and ultimately the scheme adjudicator's order to repay.The providers failed to comply with the orders and investors appear to have lost their investments altogether.

Online Forex Trading Platforms

80% of total complaints were about offshore-owned online forex trading platforms, and almost all alleged “failure to follow instructions”…to refund investments. This type of provider is now subject to particular scrutiny from the regulator because of concerns about their legitimate intent and implications for New Zealand’s reputation. 18 of these complaints escalated to the disputes process and were upheld by the adjudicator who ordered the investments be refunded to the complainants. The orders have not been complied with and membership of two -TarsierFX and UMOFX has been terminated.

Complaints by location

83% of complaints came from non-residents, 287 complaints from Russia, 22 from China and 69 from other countries.

83, or 17% of the complaints registered originated in New Zealand - 55% from Auckland. 34 complaints were by phone, the balance received via email direct or through the website.

Key lessons learnt

The key lessons for consumers from the disputes resolved and systemic issues is, on line trading is risky, especially where leveraged, check the credentials of providers, do not enter into terms and conditions without understanding them, or where there is no reputation at stake.

For members, the key lessons are to provide regular, clear and concise disclosure and to review decisions posted on our website for guidance as to what is considered fair and reasonable in the context of code, legislation and common law.

The full annual report will be available on the website by end of August.