How a British Carbon Credit Pusher Got a Listing on a Danish Stock Exchange, Brokered by a New Zealand Financial Company Run by an Australian Residing in Switzerland

By Richard Smith, who, after repeated beatings, is trying his hand at non-cryptic headlines.

Globalization is great, isn’t it? Lots of important connections fall down the cracks between regulators and jurisdictions, for one thing.

Let us start with a bloke called Pieter, who I suppose might be Dutch, in the comments at Djakarta-based blog REDD-Monitor. Pieter is quoting a Luxembourg-based carbon credits broker/custodian, Carbon-Ex SARL:

Your purchase of your order from Carbon-Ex Sarl was introduced by Carbon Growth and Seagreen Global.

Now we’ll whirl off in pursuit of the Seagreen Global name, which leads via shared directors to Seagreen Group Limited, a UK company which gained a listing on GXG Markets in January. GXG markets isn’t strictly a Danish Stock Exchange any more; these days, it is styled a “European Regulated Market”. But it is still “a Danish legal entity authorised by Finanstilsynet, the Danish Financial Supervisory Authority. ” So, “a Danish Stock Exchange” still looks close enough, to a blogger determined to wedge a world tour into his headline, at any rate.

From Seagreen’s blurb at GXG Markets, we discover what they are up to:

Seagreen Capital PLC (Seagreen) and its affiliated group of companies provides commodity brokerage services and specialises in identifying ‘current’ asset classes that hold growth potential or provide the necessary volatility for trading. Seagreen has extensive experience in the trading of Emissions and Commodities and its dedicated brokers offer individual strategies, tailored to meet every client realistic expectations, keeping them updated at all times with market trends and analytical data.

Seagreen Commodities’ rare earth metals collection is their latest structured commodity package. The product has been identified to potentially benefit from price increases driven by today’s global demand for digital and technology driven products. Baskets on average hold 5 of the ‘must have’ 17 rare earth metals.

Seagreen suggests these 5 are currently the most beneficial for any metals buyer. With the explosion of iPhones, iPads, miniature hard drives used in most modern computer related technologies, the demand for these irreplaceable rare earth metals is now ever-increasing with expectations of continual and consistent outstanding results in this asset class. Gold, Silver and other more mainstream precious metals are also popular for investors wishing to hedge against inflation and own a tangible asset.

Seagreen now has a strong position within the renewable energy sector and emission trading market, working as one of the few exclusive providers in the UK to the American cap and trade market, driven by demand from Fortune 1000 companies and increasingly stringent government legislation the world over, in the race to reduce carbon emissions.

OK,  so Seagreen flog 1) carbon credits as investments, a pitch that the UK’s Financial Conduct Authority warned about here, in September 2013:

Find out how carbon credit trading works, why we think you should avoid investing in carbon credits and related markets, and how to protect yourself from what is most likely a scam.

A carbon credit is a certificate or permit which represents the right to emit one tonne of carbon dioxide (CO2) and they can be traded for money.

However, many investors have told us they are not able to sell or trade the carbon credits they have bought. None of these investors reported making a profit.

This supports our view that there is not a viable secondary market for ordinary investors to sell or trade carbon credits, despite claims and promises made by many firms, advisers and brokers promoting and selling them as an investment.

…and also 2) rare earth metals, a pitch that the UK’s Financial Conduct Authority warned about here, in May 2013:

We are yet to see any convincing evidence that there is a viable market for retail investors to make money from investments in rare earth metals.

Manufacturing companies that use the metals almost always buy them in very large quantities, making it highly unlikely they will deal with small independent retail consumers.

It has been reported to us that callers promoting investments in rare earth metals are using dubious, high-pressure sales tactics and targeting vulnerable consumers.

We believe the firms promoting investments in rare earth metals have previously been involved in selling other high risk and unregulated products such as carbon credits, fine wines, land without planning permission and overseas land and crops.

There is a strong possibility of fraud with each of these products, including rare earth metals, because they are unregulated and it is difficult to confirm that the product or scheme exists, especially when it is said to be based abroad. It seems unscrupulous brokers attempt to take advantage of this uncertainty to get people to invest.

Readers may feel that that Seagreen’s stated business activities fit the UK Financial Conduct Authority’s profile of suspected frauds to a ‘t’.

GXG Markets did suspend Seagreen, on 21st June 2013. But there the matter appears to be resting. Will Seagreen get its listing back, or will it be delisted? No decision has been made. We do not know what other investigations have been initiated by GXG Markets, if any. One profitable line of enquiry might be Seagreen’s introducing broker at GXG.

Via the GXG contact page for Seagreen, we can glean a little more info: Seagreen’s web site is defunct, and Seagreen’s GXG Broker is London Capital (NZ), “a trading name of Asia Finance Corporation Ltd”. It is incorporated in New Zealand, which makes the UK-incorporated Seagreen’s choice of inconveniently-time-zoned introducing broker either bizarre, or all too explicable.

Strangely, given this trading name malarkey, one can find a perfectly serviceable New Zealand company called London Capital NZ. Its sole director is an Australian living in Switzerland, Bryan Leonard Cook. London Capital NZ was, for a while, one of My Favourite Things (jaundiced survey here), a New-Zealand registered provider of financial services that had no physical presence in New Zealand beyond its serviced offices.

But London Capital NZ was deregistered as a New Zealand Financial Services provider on 7th March 2013. Compulsory deregistration takes a month, so that the company, if so minded, can contest it. So we deduce that in the case of London Capital NZ, deregistration was apparently initiated by Companies Office, in early February, and was not successfully contested by London Capital NZ.

Next it turns out that, just like London Capital NZ, Asia Finance Corporation Ltd is a New-Zealand registered provider of financial services that has no presence in New Zealand beyond its serviced offices. It was incorporated on 27 Feb 2013 and registered as a New Zealand Financial Services provider on 12th April 2013. Its sole director is an Australian living in Switzerland, Bryan Leonard Cook.

What is going on? This is speculation, but from the registration dates, it looks as if London Capital NZ got picked up by the NZ authorities for some infringement, and given a month to contest its deregistration. Its owner simply registered a new company, Asia Finance Corporation Ltd, registered it as an FSP, explained the name change away as a trading name to GXG, and carried right on introducing.

What is certain is that for the period between 7th March and 12th April, “London Capital NZ” was, well, nothing in particular, I suppose, except the name of an introducing broker at GXG Markets with no firmly identifiable ties to any particular registered financial entity on the planet.

This is not to imply that the presence or absence of a New Zealand FSP registration makes any difference to how London Capital NZ is actually regulated, in New Zealand. The Reserve Bank of New Zealand, the banking regulator down there, has this to say about offshore financial operations:

Entities incorporated in New Zealand may provide financial services outside New Zealand without any form of licensing. Companies that do this are just ordinary New Zealand incorporated entities with no special status, rights, or privileges under New Zealand law. They are companies or other forms of incorporated entity that are subject to normal New Zealand commercial laws in the same way as all New Zealand incorporated entities. New Zealand incorporated entities that provide financial services solely outside New Zealand are not prudentially supervised by the Reserve Bank or any other New Zealand regulatory authority.

There are a number of New Zealand incorporated entities that operate in this manner, i.e. their business consists of providing financial services solely outside of New Zealand. These entities usually operate over the internet and have no physical presence in New Zealand. They should not give the impression in their advertising material that they are a New Zealand regulated or supervised financial institution, because they are not.

Meanwhile, over at GXG Markets, Asia Finance Corporation Ltd says this :

Asia Finance Corporation Ltd is authorised and regulated by the New Zealand Financial Services Provider.

…which doesn’t make sense, but you can see what they are driving at (it should be “as a New Zealand Financial Services Provider”, not “by the New Zealand Financial Services Provider”). Unfortunately, as you can see, the Reserve Bank of New Zealand’s correction to that statement would read quite differently:

Asia Finance Corporation Ltd is neither supervised nor regulated by anybody in New Zealand at all.

This mess is the fruit of the confusion sowed by the New Zealand Ministry of Economic Development, which is still perfectly happy to assign the meaningless designation “New Zealand Financial Services Provider” to pretty much any old offshore crock, which, registration in hand, can then blag its way into an introducer’s role on  a dopey small stock exchange on the other side of the planet.

Despite this background, of which they are aware (I told them about it, in May), GXG Markets still think that London Capital NZ is a suitable introducing broker.

One hesitates, briefly, to suggest an alternative explanation for this apparent obtuseness: GXG listing fees from dodgy companies introduced by dubious brokers are just as fungible as listing fees from decent companies introduced by honest brokers. I do hope that’s not all there is to it.