Support for investors and industry; regulatory burden reduced
The Financial Markets Authority (FMA) is closely monitoring the impact of the coronavirus situation on New Zealand’s financial markets and considering all available options to ensure markets continue to function well and to support participants, customers and investors.
FMA Chief Executive Rob Everett said the regulator was working closely with the Council of Financial Regulators (CoFR), which includes Treasury, the Reserve Bank, Commerce Commission and MBIE, as well as frontline regulators NZX, Supervisors and Audit bodies to ensure a co-ordinated response for the industry.
The FMA was in close contact with market participants to understand how they are responding to disruptions caused by COVID-19.
“We want to understand the pressures they are facing, how they are coping and how they are serving the needs of customers,” said Mr Everett.
Mr Everett said it was an uncertain time for KiwiSaver members and other investors, with many seeing a significant drop in their balances.
“At this point, we have not found any inappropriate behaviour by KiwiSaver providers and many KiwiSaver members are taking heed of the advice to stick with their long-term investment strategy.
“However, many providers are reporting significantly increased switching activity – mostly from growth or high-growth funds into conservative funds. The FMA urges KiwiSaver investors to consider carefully before switching funds, as they will, on occasion, see major ups and downs in balances.
“Recognising that some people might need the money immediately for a first home, switching funds during market turbulence forces the sale of investments at lower prices and gives up the prospect of gains when those investments start to recover.
“KiwiSaver providers should be providing general (class) advice to members at this time.”
The FMA had published warnings to consumers about investment scams exploiting market conditions and uncertainty due to the COVID-19 pandemic. A number of other agencies and overseas regulators are concerned that the anxieties caused by the virus pandemic and related market disruption may make some investors particularly vulnerable to scam artists.
“Do not invest or make purchases following cold calls or online adverts from outfits you cannot verify,” said Mr Everett. “Times like this are ripe for criminals and sophisticated fraudsters to trick people into parting with money or handing over passwords or other identity information.”
Mr Everett said the FMA was considering delays to some of its regulatory work to ease the regulatory burden on market participants to allow full devotion of their resource to helping customers and investors. It was also inviting industry to suggest ways where the regulator can support them at this time.
With this in mind, the FMA and NZX have announced their intention to give NZX-listed firms, Financial Markets Conduct Act-reporting entities and auditors more time to publish their audited annual financial statements.
“It is essential that firms continue to provide timely updates to the market on their financial position and meet their continuous disclosure requirements,” said Mr Everett. “To date, we have seen a strong commitment to this principle.
“However, we recognise that the rapidly unfolding situation around COVID-19 presents significant challenges for firms that are trying to finalise their accounts and forecasts. With this in mind, we are working towards extending financial reporting deadlines by two months.”
The FMA had also delayed its planned thematic review on liquidity for managed investment schemes to ensure they can continue to focus on the issues at hand. It was also considering deferral or reduction of other monitoring activity such as audit quality reviews for audit firms, NZX’s Obligations Review and other planned proactive and thematic monitoring activity and information gathering.
“The FMA is putting intense focus on its dialogue with regulated firms and ensuring that communication during this time of market and human stress is the best it can be. While we are limiting face-to-face meetings in line with direction from the government, we emphasise that we want to hear from the industry about any challenges they have and about any areas where the FMA can assist them.”