Compliance approach

Our compliance strategy emphasises a 'top of the cliff' approach and focuses on lifting the standards of the businesses and professionals we regulate.

We seek to foster a culture where all market participants proactively work to set appropriate standards; put in place a robust approach to managing and monitoring compliance and willingly share information with us.

We recognise that the burden of complying with financial regulation imposes cost, which is borne by those who participate in our market. However, a lack of strong regulation can harm investor confidence and informed participation. It is all about finding a balance so that businesses are able to comply with the law, and also focus on their day-to-day business activities.  

We have a suite of tools we can use to reduce unnecessary regulatory burden including legislative and administrative notices and guidance.

Getting the rules right

Ensuring the regulatory burden is appropriate is a key focus for the FMA. To achieve this we work closely with the Ministry of Business Innovation and Employment on policy and law reform and efficiently with other regulators.

Using legislative notices and waivers

We have legislative, administrative notices or waivers we can use to modify legal requirements when appropriate. These include exemptions; designations; frameworks or methodologies; FMC public accountability designations and levy waivers.

Typically, individual notices help one business. Class notices have a wider impact - they can affect a larger number of businesses and their clients and can be relied on by many businesses in the same class. 

Providing timely guidance

• Our Strategic Risk Outlook, Annual Corporate Plan and the Good Conduct Guide tell the market about where we see the most potential for risk or harm, where we intend to focus our resources, and why.
• We also provide information on our intended approach
• Monitoring and thematic reports give feedback on what we think is good and bad conduct, and our response to that. These reports can also encourage businesses to tell us about emerging issues, understand our approach and tell us about any further need for guidance

Our monitoring activities generally fall into one of three broad categories:Our monitoring activities generally fall into one of three broad categories:

• Responsive monitoring – undertaken in response to information received from market participants themselves or other parties, including complaints.
• Thematic monitoring – deep-dive style review work to better understand a particular market segment and/or issue. Some of this monitoring is exploratory in nature, to help build understanding and assist with setting expectations of market participants.
• Planned monitoring – monitoring engagements that are planned in advance to take a more in-depth look at a particular entity. Our planned monitoring reviews generally also involve onsite visits by FMA staff to conduct interviews with key staff, as well as a review of documents. 

Where our monitoring or enquiries identify non-compliance, we have a range of tools available to deliver a timely, effective and proportionate response.

We may undertake a further inquiry or expect the participant to adjust its compliance, and we may follow up to ensure that this is done.

In some cases, notices, warnings, directions or enforceable undertakings may be appropriate.

Further or serious non-compliance might result in stronger action, such as suspension or removal of licences or other enforcement action.

We are committed to an open and educative approach so all financial markets participants have clear and well-understood responsibilities. We publish summaries of the aggregate findings from our monitoring and surveillance to assist participants in understanding our expectations and enable them to check their compliance and raise standards if necessary

We focus our resources on the areas of greatest risk and where we can provide the most benefit. This helps ensure that regulation is proportionate to the risks mitigated, and the benefits to be achieved.

As we evolve and improve our monitoring approach, we try to ensure that monitoring activities are not more burdensome than they need to be. Here are some improvements we have put in place:

• reduced monitoring visits for businesses 
• development of closer relationships with the key businesses we regulate

Our licensing approach is risk-based. Applicants who may present the greatest harm will receive greater scrutiny. Applying a risk-based approach to licensing allows us to assess applications efficiently, lessening the need for further engagement with lower risk applicants.

We recognise that clear licensing guides are needed to step applicants through the licensing process. We are continually working to improve our licensing guides, so they are clear and easy to understand. 

When we develop regulatory returns we keep some very clear principles in mind to try to reduce regulatory burden. These are to:

• try to obtain information from other sources first
• only ask for information we intend to use
• consult and seek market feedback before we create regulatory returns
• seek feedback on our regulatory return process so we can improve it.

We have a wide range of functions and powers to achieve our statutory objectives and this capability has been enhanced by the Financial Markets Conduct Act 2013 (FMC Act).

Our action will be proportionate to the misconduct to achieve an appropriate market outcome. In the event of market misconduct, we may intervene on an informal basis or at a low level.  However, we are also committed to taking strong action and holding individuals and entities accountable when they break the law and fail to meet the standards that are expected of them.