By Samantha Barrass
CEO, Financial Markets Authority
Any organisation, including the Financial Markets Authority - Te Mana Tātai Hokohoko (FMA) - has to work within its resources, and focus on the things that matter. That is, thinking about the end result we want to achieve, and ensuring the work we do reflects that.
Our job is to support a thriving financial sector that New Zealanders have confidence in.
We have said that the best way for us to do this is to be forward looking. To focus on the important emerging risks and opportunities.
This week, we launched our first Financial Conduct Report, sets out what those are in the sectors we regulate, and how we propose to address them in the coming 12 months.
This is critical to delivering our outcomes-focused approach by focusing our resources where they will make the biggest impact.
Sharing our work plan in advance means firms and organisations know what to expect from us and can build it into their own plans. Sharing our work plan in advance means we will also be accountable.
In a year's time, when we release the second FCR, we will set out what has been achieved, as well as look head to the next year.
This report shows that we value transparency, accountability and engagement. We're taking a no-surprises approach to enable the financial sector - including banks, insurers, investment managers, capital markets and financial advisers - to make sure they're doing the right thing by their customers.
An example relating to consumer protection is our response to a growing number of cases of mortgage, health and life insurance products being sold to consumers through misleading or fraudulent activities.
This means we will be focused on ensuring insurance, mortgage and financial advice firms deliver products and services that meet consumers' needs and expectations and that consumers are receiving clear communications on service offerings, product exclusions and disclosures, fees and premiums. We will have a particular focus on conduct that results in customers not receiving the products or services they were promised.
Banks and lenders will come under the microscope to ensure they are complying with new Conduct of Financial Institutions (Cofi) legislation introduced in March to ensure their customers are treated fairly when providing financial products and services.
We want to ensure consumers know how to complain and we'd like industry to take swift action to stop further harm and provide timely remediation when issues arise.
Safekeeping of client money and property is fundamental for confidence in financial markets. So we'll be working with the Ministry of Business, Innovation and Employment (MBIE) to improve protections for assets held in custody.
Strong custody is not just important to protect against fraud. Robust client asset protection provides confidence in our regulatory environment.
In the investment product space, our research indicates that investors often trust issuers to fulfil their claims without verification. However, we have observed that disclosures for ethical investments are frequently confusing, unclear, and inconsistent. While there are some good practices, we will be publishing refreshed guidance on our expectations for ethical investment disclosures and advertising.
These are a handful of examples of outcomes we are seeking as a pragmatic regulator, in line with our overarching statutory objective of fair, efficient, and transparent financial markets and ensuring our regulation is consistent with growing the economy and enabling innovation.
It is important we have the regulatory tools we need to be a proactive, effective and efficient regulator. The Financial Markets Authority supports legislative change that will introduce on-site inspection and change in control powers.
The FMA already routinely conducts monitoring visits with consent, and this will put a formal legal framework in place. Our work is impeded by firms that refuse or continuously delay monitoring visits.
Change in control approval requirements will let FMA engage proactively with firms on significant changes of ownership.
We will have a streamlined process for this and our focus will be on changes that may give rise to material conduct risks if they were to proceed.
As well as providing licensing, monitoring and guidance to the industry and enforcing current laws to bolster confidence in our financial sector, the Financial Markets Authority is focused on promoting innovation and growth in the financial sector.
A priority in the coming year will be working on ways to streamline regulations. For example, we are implementing a single conduct licence regime and supporting market access through our regulatory sandbox pilot.
By supporting firms to test new products and services in a sandbox environment, we can improve our understanding of where our laws may impede innovation or drive firms to find ways to operate outside the regulatory perimeter.
We are also preparing ourselves for potential new areas of focus.
The report shows we are building our understanding of emerging risks and opportunities in private markets, virtual assets, tokenisation, and industry readiness for operational resilience.
By publishing this report we are being very clear about the key risks and opportunities on the FMA's radar and how we intend to address them.
We encourage Boards, Executives and Leaders to use the FCR to understand the FMA's regulatory priorities for the coming year and consider how these insights can help their business ensure better outcomes for consumers and markets.
Published annually, the FCR will be a key tool to highlight conduct issues (including improvements) we are seeing and key areas of regulatory focus for the year ahead.
We anticipate the FCR will become a go-to reference point for the industry to understand where their regulator is focused, and what we aim to achieve for the year ahead.
