Broker fined $200k, booted off register

Broking firm Pegasus Markets has been ordered to pay $200,000 for a ‘‘deliberate, prolonged and harmful’’ pretence that it was registered as a financial service provider.

Companies Office records show the Registrar of Companies has begun action to remove the company from the register, effectively shutting it down.

Pegasus was registered to provide high-risk derivatives to investors within New Zealand, but in June 2015, the Financial Markets Authority (FMA) concluded it was only providing services to investors overseas.

The FMA believed these overseas investors would be misled into thinking Pegasus was subject to regulation in New Zealand, which has an international reputation as having a safe, highly regulated financial services sector.

Pegasus’ pretence posed a threat to the integrity and reputation of New Zealand’s financial markets, the FMA said, and the company was deregistered in August 2015.

Despite that, as late as February 2018 Pegasus was still claiming on its websites that it was registered as a financial service provider in New Zealand.

Pegasus Markets directors Rafael Lemonche, based in Barcelona, Spain, and Michael Reps, from Warkworth, were notified that the company was deregistered.

However, they deliberately and blatantly continued to advertise that it was regulated in New Zealand, the FMA said.

Pegasus was sentenced in absentia at the Waitakere District Court on December 16.

Judge June Jelas said: ‘‘New Zealand cannot be a country where breaches of its financial markets regulatory systems can be an acceptable commercial consequence.’’

The prolonged duration of the offending was an aggravating factor.

‘‘The false and misleading representations on both of Pegasus’ website continued to be available to the global financial market for a period of over two-anda-half years.’’

The judge criticised the addition of a silver fern to the Pegasus websites in 2017, which she said was designed to further enhance the impression that Pegasus’ business activities were being overseen by New Zealand regulators, when they were not.

‘‘I accept the FMA’s submission that the false and misleading statements risked undermining New Zealand’s financial market regime,’’ the judge said.

In a similar case, Morgan DeVere Corporate Finance Ltd was fined $40,000 at the Wellington District Court in February 2019 for continuing to claim it was registered on the Financial Service Providers register after it had been deregistered.