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03 March 2021

Pegasus Markets Limited and Director Michael Reps

Background

The Financial Markets Authority (FMA) brought criminal proceedings against Pegasus Markets Ltd and its New Zealand–based director, Michael Reps, for breaches of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 (FSP Act). The case concerned false representations that Pegasus Markets was registered on the Financial Service Providers Register (FSPR) when it had in fact been deregistered.

Between 2015 and 2018, Pegasus Markets continued to state on two websites that it was registered on the FSPR despite deregistration and explicit warnings from the Companies Office that these statements were misleading. This misrepresentation persisted for approximately two and a half years.

In February 2018, the FMA filed criminal charges against both the company and Mr Reps. Pegasus Markets was charged with two counts of breaching section 12 of the FSP Act, which prohibits holding out as a provider of financial services unless registered and a member of an approved dispute resolution scheme. Mr Reps was also charged under sections 12 and 40 of the Act for knowingly authorising or failing to prevent the offending conduct. These charges were the first of their kind under section 12 of the FSP Act.

In September 2020, the North Shore District Court found Pegasus Markets Ltd and Mr Reps guilty on all charges. The court confirmed that the company had unlawfully held itself out as registered, and that Mr Reps had breached his director obligations by failing to prevent the offending.

In December 2020, Judge Jelas sentenced Pegasus Markets Ltd to a fine of NZD 200,000. In her remarks, the judge emphasised that breaches of New Zealand’s financial markets regulatory framework must result in real and meaningful consequences to maintain market integrity and deter non‑compliance.

In March 2021, Mr Reps was sentenced in the Waitakere District Court to two months’ community detention and 90 hours of community work. The sentencing judge reserved her reasons at the time of delivery.

Overall, the case underscores the FMA’s enforcement stance on misleading conduct relating to FSPR registration, the personal accountability of directors under the FSP Act, and the courts’ expectation that regulatory breaches in financial markets attract substantive penalties to uphold confidence in New Zealand’s regulatory regime.

Timeline

March 2021

Michael Reps, the New Zealand-based director of Pegasus Markets Limited, has been sentenced to two months’ community detention and 90 hours’ community work after criminal charges were brought by the Financial Markets Authority (FMA) for breaches to the Financial Service Providers (Registration and Dispute Resolution) Act (FSP Act).

Judge Jelas delivered the sentence today in the Waitakere District Court and reserved her reasons.

December 2020

In the North Shore District Court, Judge Jelas sentenced Pegasus Markets to a fine of $200,000. The judge said, "New Zealand cannot be a country where breaches of its financial markets regulatory systems can be an acceptable commercial consequence. The Court’s response to breaches needs to be sufficient to ensure financial operators in the New Zealand market will incur real and meaningful consequences if they breach the regulatory framework."

Mr Reps is due to be sentenced in 2021.

September 2020

Pegasus Markets Ltd and its New Zealand-based director, Michael Reps, were found guilty of all criminal charges brought by the FMA for breaches to the Financial Service Providers (Registration and Dispute Resolution) Act (FSP Act).

In the North Shore District Court, Judge Jelas found Pegasus guilty of two charges of breaching section 12 of the FSP Act, which states that no one can purport to hold out as registered on the FSPR unless they are registered on the FSPR and a member of an approved dispute resolution scheme.

Mr Reps was also found guilty of breaching section 40, for knowingly failing to prevent Pegasus from committing an offence under the Act.

16 April 2019

The case remains before the North Shore District Court.

31 August 2018

Hearing to be held at the North Shore District Court.

27 February 2018

FMA has filed criminal charges against Pegasus Markets Ltd and Michael Reps for breaching the Financial Service Providers (Registration and Dispute Resolution) Act (FSP Act).

The company is charged with two counts of breaching section 12 of the FSP Act.

The New Zealand-based director is charged with two counts of breaching sections 12 and 40 of the FSP Act.

Section 12 of the FSP Act provides that no person, including a corporation, can hold out that it is in the business of providing a financial service unless it is registered on the FSPR and a member of an approved dispute resolution scheme. Section 40 of the FSP Act covers a director’s liability if he knowingly authorises or knowingly fails to prevent a corporation committing an offence under the Act.

Each charge for breaching section 12 of the FSP Act carries a maximum fine of $300,000 for a company and a maximum penalty of either $100,000 fine and/or 1 year imprisonment for an individual. These charges are the first of their kind under Section 12 of the FSP Act.

The FMA alleges the company continued to hold out on two different websites that it was registered on the Financial Service Providers Register (FSPR) after it had been deregistered and despite subsequent warnings from Companies Office regarding misleading statements on its website as to FSPR registration.