The Financial Markets Authority (FMA) today released its Annual Report for the year to June 2019. This was a watershed year for the regulator when the Financial Markets Conduct Act was fully implemented and normalised across the financial sectors the FMA regulates.
The FMA also applied a wider lens to review parts of the financial services it does not currently regulate – banking and insurance – completing the joint Conduct and Culture review of these sectors with the Reserve Bank of New Zealand. This was the single largest thematic review the FMA has undertaken and dominated activity for the year.
The review, which involved close collaboration with the Reserve Bank, was planned and executed in a short space of time. It noted gaps in the legislation for regulating conduct in these sectors and the Government has subsequently published proposals in September, setting out its intentions to regulate and license this sector, subject to parliamentary approval.
This was also a strong year for enforcement activity. The FMA addressed misconduct in a number of ways, including a variety of court proceedings (both civil and criminal), an enforceable undertaking, and public warnings.
FMA chief executive Rob Everett said credible deterrence had always been critical to its mission to promote fair, efficient and transparent markets.
A noteworthy litigation success was the proceeding versus ANZ, which was resolved in the Supreme Court in April. The court decision established the right for the FMA to share information with Ross Asset Management investors about ANZ’s role as banker during the period David Ross was operating a Ponzi scheme.
Mr Everett said, “Responding to ANZ’s action against us was long and costly, but it was an important battle to establish the right for investors to exercise their private rights to make a claim.
“We recognise that being more active in the enforcement space is costly. This year we far exceeded our litigation budget, although we were able to cover the overspend from our reserves.”
The Government has this week approved an increase in the FMA’s litigation fund for the current year: “We are pleased this additional funding has been confirmed for the current year so we can maintain our momentum as an active regulator.”
FMA prepares industry for new regime
The Annual Report also highlights the FMA’s work to improve audit quality, build investor capability, and prepare the financial advice industry for the new regime in 2020 through guidance and lifted engagement.
The passing of the Financial Services Legislation Amendment Act 2019 gave the FMA the remit to license and monitor obligations under the new financial advice regime.
Mr Everett said, “The Act and the new Code of Conduct will level the regulatory playing field for everyone giving financial advice. This will be a big shift for many advisers, but supports a broader effort to ensure access to high-quality financial advice for all New Zealanders.”