12 Nov 2019

FMA 'don't know what they're doing' - burned currency trader

10:50 am on 12 November 2019

A currency trader who lost $70,000 in a sharp, short-lived downturn, thinks the currency market is not properly regulated.

open tipped over savings jar with New Zealand currency coins spilling on to rustic wooden on wooden table closeup.

Photo: 123RF

The trader, who RNZ Business spoke to on the condition of anonymity, said his broker automatically closed out his risk-free position on the New Zealand and Australian dollars during a brief crash in the currency market in January.

He said he complained to the Financial Markets Authority (FMA) about the broker's action but did not get proper consideration of the matter, and felt the Authority was asleep at the wheel and had little knowledge of the foreign exchange market.

"I do not think they know what they are doing."

The trader argued that, while he had not understood the broker's terms and conditions, he did not feel he was fairly treated, even though he was partially compensated by the broker for his losses.

"I just want to issue a warning to other foreign exchange traders that there is a fatal flaw in the system. Brokers can legally steal client's money in a flash crash," the trader said.

RNZ Business has seen emails from the chief executive of the FMA, Rob Everett, responding to the trader's complaint, in which he said it was not the FMA's role to provide advice or agitate on his behalf.

In a statement, an FMA spokesperson said it was policy not to comment on individual complaints for confidentiality reasons and in this instance did not know the substance of the complaint.

"We are confident we have robust processes for dealing with complaints and that we have the necessary expertise and experience to judge the complaints we receive, both from the public and market participants."

He said it received hundreds of complaints every year and there were cases with insufficient information, evidence, or no legal basis to take action.

"We must always test the public interest in determining whether we need to escalate a complaint and establish an investigation into potential misconduct."

The spokesperson said the FMA balanced whether there was sufficient evidence to show a legal breach, against the resources and funding needed to take action.

"In many of the complaints we receive that test is not reached."

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