24 September 2020

Supervision Insights report

An overview of the FMA’s supervision activities and findings from our monitoring reviews of regulated entities.

Download the Supervision Insights report PDF

Foreword from Chief Executive Rob Everett

Foreword from Rob Everett on supervision report

When the FMA lists our strategic priorities in corporate documents, ‘Governance and culture’ always comes first. This reflects the importance we ascribe to this area. We expect our regulated entities to have the same focus.

The monitoring within the scope of this report is one of the ways we assess the state of entities’ governance and culture. As set out in our Statement of Intent, we want to see that “financial service providers demonstrate an appropriate customer-centric culture and improvements in governance, incentive structures, sales and advice processes, and systems to mitigate conduct risk”.

The insights in this report tell us that large parts of the industry are working hard to move towards the expectations we and other regulators have articulated. They also give a clear message of problem areas within the industry and how we expect these to be improved. Most of the issues we identified were the result of a casual or careless approach to conduct and compliance, rather than being deliberate misconduct. However, left unchecked, this disregard can escalate into poor outcomes for customers, in a way that may not be immediately obvious. We want there to be no doubt that providers will be culpable if they fail to take appropriate care of customers and their outcomes.

We have seen a lot of very good progress in entities shifting their focus to serving the needs of customers, especially since the publication of our Conduct and Culture reports and the increased public scrutiny on financial services as a whole. But too often this still feels like an afterthought – something that is tacked on rather than at the heart of governance and culture.

Throughout our monitoring, we also came across attitudes that good conduct is something that needs to be demonstrated only when the FMA is visiting, or that we should be hand-holding entities through their compliance obligations. I want to be very clear that good conduct and compliance should happen all the time, not just when the regulator is watching. If entities share our end objective of serving customers and investors, then appreciation of the value of investing effort in good conduct frameworks should be shared too.

Where we identify significant breaches of the rules, or where entities do not address our recommendations in an appropriate or timely manner, we may take further action. I anticipate this action will be increasingly strong. While we are awaiting a legislative framework for banking and insurance, we are at a point now where the volume of available guidance, level of engagement and maturity of the regulatory regime mean there are no excuses for conduct that presents the risk of harm to investors, customers and the integrity of the markets.

Rob Everett, FMA Chief Executive