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09 September 2024

Rockfort Markets

Background

The Financial Markets Authority (FMA) cancelled Rockfort’s derivatives issuer (DI) licence in March 2023 after determining that Rockfort had materially contravened multiple licence obligations and was no longer capable of meeting the regulatory standards required of a licensed entity.

Rockfort appealed the cancellation to the High Court, arguing that only four licence breaches had occurred, that these were not material, that the FMA’s assessment of its ongoing fitness to hold a licence was incorrect, and that a less severe regulatory response would have been appropriate. The High Court, led by Justice Edwards, dismissed the appeal in November 2023, upholding the FMA’s findings on all key points.

A subsequent appeal to the Court of Appeal was lodged, during which a non‑publication order remained in place. However, Rockfort later discontinued its appeal, allowing the FMA to publish details of the case.

The licence cancellation was based on findings that Rockfort had materially breached eight licence obligations, including failure to comply with a formal Direction Order issued in March 2021, inadequate systems and controls to ensure regulatory compliance, and a decline in governance, capability, and compliance standards compared with those assessed at initial licensing. The FMA also identified deficiencies in Rockfort’s product disclosure statement, including the omission of mandatory information relating to hedging counterparties.

In addition, the FMA found a sustained pattern of potentially false or misleading advertising between 2019 and 2022, including claims that Rockfort was licensed to provide forex and share broking services that were not covered by its licence. Despite repeated engagement and a formal order to remove this advertising, the content remained accessible. The FMA concluded that Rockfort was no longer capable of effectively performing the role of a DI and was likely to breach market service obligations in the future.

As part of the cancellation process, the FMA imposed additional conditions and required Rockfort to close out remaining open derivatives contracts with customers ahead of the licence revocation.

Timeline

9 September 2024

The FMA initially decided to cancel Rockfort’s licence in March 2023 because it was satisfied Rockfort materially contravened its licence obligations. Rockfort appealed the FMA’s decision to the High Court and obtained orders preventing publication of any information relating to the case.  

Rockfort argued it only breached four of its licence obligations, that the breaches were not material, that the FMA was wrong to find it no longer met the requirements for a licence, and that a more lenient regulatory response would have been sufficient to deal with its non-compliance. 

Justice Edwards dismissed Rockfort’s appeal on the above points in November 2023. Rockfort appealed the High Court judgment to the Court of Appeal and the non-publication order remained in place; however, it has now discontinued its appeal and the FMA can publish the case.  

Reasons for cancellation 

Rockfort’s licence was cancelled because the FMA was satisfied Rockfort materially contravened eight of its licence obligations. They included, but were not limited to: 

  • Failure to comply with a Direction Order issued to Rockfort on 3 March 2021. 
  • Failure to maintain adequate and effective systems, policies, processes, and controls to ensure compliance with its obligations under the standard conditions of its licence (including in relation to its advertising) in an effective manner. 
  • Failure to maintain the same or better standard of capability, governance, and compliance as was the case when the FMA assessed Rockfort's initial licensee application. 
  • Rockfort’s product disclosure statement did not contain mandatory information relating to hedging counterparties. 

The FMA found that Rockfort was no longer capable of effectively performing the role of a DI. The FMA also had reason to believe that Rockfort would be likely to contravene its market service obligations in the future.

The FMA engaged with Rockfort in 2019 and 2020 in relation to potentially false or misleading advertising. On both occasions Rockfort did not fully comply with the FMA’s requests to remove the advertising. In March 2021, the FMA ordered Rockfort to remove what it considered to be false or misleading advertising on its website. The advertising in question suggested Rockfort was licenced to provide forex and share broking activities when those were not covered by its licence. The FMA subsequently found the advertising remained on Rockfort’s website in August 2022. 

The FMA imposed additional specific conditions and requested Rockfort close out the few remaining open derivatives contracts it had with customers ahead of the licence cancellation. 

View the Rockfort Markets v FMA Judgment