Page last updated: 27 July 2022

Enforcement Policy

Our enforcement policy is intended to guide and inform financial market participants. It is also intended to be a living policy and we may revise it from time to time according to what our objectives and priorities are. It is not exhaustive and is not binding.

Enforcement policy

Our Strategic Risk Outlook identifies strategic priorities that reflect these risks and their drivers. It also identifies specific areas of focus where we think we can most effectively minimise conduct risks, improve market behaviour, benefit participants and investors, and help strengthen New Zealand’s economy.

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).

In the event of market misconduct, we may intervene on an informal basis or at a low level. Our action will be proportionate to the misconduct to achieve an appropriate market outcome. 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.

We intend to use the full range of tools available to ensure the most appropriate and fit-for-purpose regulatory response to achieve the desired outcome. We have adopted a principled approach to providing consistency in choosing our regulatory responses, this is found in our regulatory response guidelines.

The regulatory response guidelines contain a comprehensive list of the regulatory responses which we can take, and the intended aim of each response. It also includes a non-exhaustive guide on the criteria that might be applied in deciding what the appropriate response in each case may be.

As with this policy, the guidelines are not exhaustive or legally binding. We will revise the regulatory response guidelines from time to time according to our objectives and priorities.

We will continue to publicise enforcement action against those active in the financial markets unless there is policy, legal or other compelling reasons not to. This approach is intended to maximise the visible deterrence of enforcement activity, and to educate market participants about the behaviour and standards we expect of those operating in our jurisdiction.

Some financial products will fail as there are no guarantees in financial investments. No regulatory regime can prevent failures in the market. We will not intervene where there has been effective and lawful disclosure following the failure; where the investor understands and accepts the risks; and where there is no unlawful conduct.

However, we will intervene, and intervene earlier in the product lifecycle, where failure follows misconduct such as mis-selling, misinformation, or market manipulation.

We will also intervene where a product is well known and useful but the sales and distribution processes do not achieve appropriate customer outcomes or meet appropriate regulatory standards.

The use of administrative orders under the FMC Act will continue to support this approach.

  • We have powers to bring both civil and criminal actions against financial market participants for misconduct.
  • We are committed to financial markets that work well for both investors and businesses seeking capital. Accordingly, we will ensure that criminal sanctions are used appropriately. This ensures there are no disincentives for businesses and individuals (including directors) to participate in the market.
  • Under the FMC Act, criminal action is reserved for the most egregious and serious misconduct. Accordingly, we will only take criminal action where there is evidence of intentional, reckless, or other serious unlawful conduct.
  • We will apply the principles of fairness and proportionality to any decision on whether to pursue civil or criminal actions.
  • Where a financial market participant is considering a settlement proposal, we would encourage this to be brought to us early in the process before we have committed to pursuing an enforcement case.
  • A useful settlement proposal would be well developed, include draft admissions, a detailed and realistic remediation proposal, and reparation where appropriate.
  • Based on our model litigant policy, we will consider all reasonable settlement proposals which meet our regulatory objectives.

Openness and co-operation with us, in particular where a compliance problem is self-identified and reported, will be important in determining the level of any sanction or whether a sanction is warranted.

We have a statutory responsibility to review the law and practices related to providing financial products and services. Among other things, this may require us to test the boundaries of the law for the overall benefit of all market participants. Accordingly, we may take ‘grey area’ cases in order to provide clarity to the market.

  • We will not enforce every breach that comes to our attention.
  • These breaches may be cases where enforcement would not be justified in the public interest, are unlikely to further our statutory and strategic objectives, or where there are opportunities for more effective intervention.
  • On this basis, we are less likely to pursue matters that are one-off, isolated, or minor events relating to a technical error or similar issues, unless there are other compelling reasons to do so. We are more likely to respond to such matters in a low level and proportionate manner, and to keep the matter and/or the financial market participant under review.
  • We are also unlikely to pursue matters that are more appropriately resolved directly by dispute resolution schemes or between private parties as a matter of contract.
  • Our regulatory response guidelines give specific guidance on how we decide the appropriate regulatory response.