Action against non-filing of financial statements pays off

A new report by the Financial Markets Authority (FMA) shows the proportion of companies filing their financial statements on time has improved significantly since the FMA’s initial review in 2014.

Eighty-two per cent of the companies reviewed had filed their statements by the due date, up from 73 per cent in the FMA’s 2014 report.

Additionally, the proportion of statements that remained outstanding after receiving a reminder notice decreased, from 10 per cent to six per cent.

In a statement the FMA says its 2015 report reviewed a similar sample of companies as the last report. These are companies who raise money from the public by issuing debt or equity securities to investors.

“These results demonstrate the success of the FMA’s approach to improving regulatory outcomes and ensuring investors have good access to financial information.  The combined effort of both the compliance and enforcement teams is raising standards of compliance among companies that issue securities to the public.

“We’ve taken a range of actions to improve compliance, including judicial action where we see the greatest harm to investors and the markets, and this has improved results overall,” said the FMA’s Director of Compliance, Elaine Campbell.

“Audited financial statements are an important reporting and communication tool and provide the public with an up-to-date picture of a company’s financial position and future prospects, allowing them to make informed financial decisions about their investments. Failure to meet filing obligations limits the availability of information to investors, the markets and the regulator,” she said.

The report also noted that no new companies were pinpointed for enforcement action for non-filing in 2014.

In addition to the significant amount of engagement carried out with companies, which has led to higher filing rates, the FMA has brought four cases to court against seven directors of eight companies. One director pleaded guilty to eight charges of non-filing under sections 18(1) and 38(b) of the Financial Reporting Act (FRA) and was fined $30,000. Another two directors pleaded guilty to four charges each of non-filing under sections 18(1) and 38(b) of the FRA and were fined $35,000 each. Two cases remain before the court and will be heard this year.

“We’re pleased with the results we’ve achieved from focussing our attention in this area. Not only does our work help to improve the availability of financial information for investors, the market and the FMA, it encourages better compliance and conduct and helps to increase confidence in New Zealand’s markets,” said Ms Campbell.

The full report is available here.

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