MR No.2016 – 38
13 December 2016
Earlier this year the FMA consulted on a guide on good conduct, signalling to New Zealand financial services providers what to expect from interaction and engagement with the conduct regulator.
With a broad range of industry submitting, the process has given the FMA valuable insight into how New Zealand financial services providers view the topic of conduct regulation in general; and the intent and content of the guide specifically.
Rob Everett, Chief Executive of the FMA, said that in the draft guide and subsequent discussions with industry, the FMA recognised that the Financial Markets Conduct Act (FMC Act) does not contain broad conduct obligations for providers, beyond prohibiting mis-selling and misrepresentation under its Fair Dealing provisions.
A number of submitters had focused on the legal status of the FMA’s expectations as to conduct set out in the draft Guide and the FMA had discussed that issue with a number of interested parties.
“The guide does not create or replace any legal obligations on financial services providers. Its intention is to prompt their leaders first to consider why good conduct matters; and then to think about how to make that happen within their own organisations.”
For other submitters, the guide was not sufficiently detailed and needed far more concrete detail about what good and bad conduct looks like, and what it takes to comply. However, as an expression of the FMA’s expectations and some indicators as to practices and processes that would reflect a good approach to conduct risk, it was never intended to be a checklist or something that laid out required processes to be followed by firms.
“The true test of any provider’s approach to conduct will not be how much it sounds like what is in the guide,” Mr Everett said. “It will be whether they can show customers – and the FMA if necessary – that what they do is consistently effective at producing good customer outcomes.”
Given the regulatory workload for both the FMA and the industry arising from the final stages of the transition to the FMC Act, the final version of the guidance and a report on the submissions received will be published in the new year.
From that point, as the FMA moves into operational mode, staff will refer to the guide as they assess how sectors and firms have designed their systems, processes and culture to generate consistently good conduct. Likewise, when confronted with issues, complaints or alleged breaches of the law, the relevant firm’s approach to conduct will be a factor and the guide will be a reference point for the FMA teams.
Consultation on A guide to the FMA’s view of good conduct closed on 31 October. Twenty nine (29) submissions were received on the guide from a broad range of industry - including financial service providers and other organisations/associations.
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