The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko - has cancelled Integrity Advisers Insurance Limited's (Integrity) Financial Advice Provider (FAP) licence for engaging in serious misconduct.
Integrity is a Christchurch-based financial service provider that held a full FAP licence, providing financial advice to approximately 500 retail customers, many of whom are from the Filipino community. Integrity's sole director and shareholder is Mr Yuriy Bazhak who was a financial adviser at Integrity.
Following an investigation, the FMA found that Integrity breached its market services licensee obligations by failing to:
- give priority to client's interests
- comply with the Code of Professional Conduct for Financial Advice Services
- treat customers fairly
- act with integrity.
The breaches relate to Integrity's treatment of clients who wanted to cancel their respective insurance policy between September 2022 and June 2023 (affected clients).
If affected clients cancelled their insurance policies, Integrity had to surrender the commission (also known as a clawback charge) it received to the relevant insurance provider. While Integrity did disclose the potential recovery of fees to clients at the start of the engagement, the FMA found Integrity unfairly pressured affected clients to retain their respective policy by issuing them with an invoice which gave them only seven days to reinstate their insurance policy or pay a fee. The fee Integrity charged affected clients was greater than was permitted by Integrity's fees policy, and in some cases equal to the commission Integrity lost.
Integrity told some affected clients that failure to pay the fee would result in Integrity reporting them to Immigration New Zealand, which Integrity said may result in an affected client's visa being cancelled or deportation. Integrity did not make any report to Immigration New Zealand but seriously misled an affected client when it told him that it had made a report. The FMA found that Integrity also tried to mislead the FMA by altering an invoice before providing it to the FMA.
Integrity denied significant misconduct. It said invoicing errors were inadvertent or not material, and it denied misleading clients or the FMA.
The FMA is satisfied that Integrity would be likely to breach its market services licensee obligations in the future. The FMA is also satisfied that Integrity's director, Mr Bazhak is no longer a fit and proper person to hold a position as a director or senior manager of a financial advice provider.
FMA Director of Specialist Supervision and Response, Peter Taylor, said: "Contrary to its name, this firm lacked any integrity with its clients. Mr Bazhak not only risked causing serious harm to his clients but preyed on their vulnerability through the threat of involving Immigration New Zealand. Actions such as these undermine both the integrity and reputation of the financial advice profession.
"Cancelling Integrity's licence is one of the strongest tools the FMA can use against a FAP and sends a clear message that this sort of conduct is not acceptable."
Provisions have been made for the care of Integrity's clients, who will be contacted by their new licenced financial advice provider or their insurer.
