MR No. 2015 – 07
9 March 2015
The Financial Markets Authority (FMA) has spelt out its practical approach to its supervision responsibilities, as the financial services and markets regulator increases the emphasis on supervision under the newly-effective Financial Markets Conduct Act 2013 (FMC Act).
The FMA’s Director of Compliance, Elaine Campbell, detailed the FMA’s supervision approach in a recent speech to a law firm in Wellington. She provided practical insights into how the FMA anticipates firms will respond when the FMA seeks information and when it conducts on-site work.
Ms Campbell reiterated the FMA’s stance, which is that it is taking a facilitative approach to businesses and professionals now the FMC Act has taken full effect.
“We’re encouraging firms to be open with us, including where things have gone wrong. We are as interested in how they are remedying a problem as much as we are in what has happened,” Ms Campbell said.
“We’re seeing a positive response, with firms actively bringing to us remediation plans where they have identified shortcomings or problems.”
About 11,000 businesses and professionals are under the FMA’s mandate in some way, with the FMA having licensing and supervision responsibilities for many of them.
The FMA is concentrating on supervision as its main form of preventative regulation.
Preventative regulation – which aims to identify and anticipate potential causes of harm, to markets integrity, and to the interests of investors - is one of the big shifts in approach for the FMA under the FMC Act.
The FMA identified its seven priority areas of potential harm in its Strategic Risk Outlook, published in December.
These include firms ensuring quality sales and advice practices, addressing conflicted conduct in financial services, ensuring high standards of governance and culture among firms, ensuring integrity and growth in capital markets, ensuring effective frontline regulators, and improving information and resources for investors making decisions about products.
Ms Campbell’s advice for firms includes:
- Start at the top. “We anticipate that boards and senior management will understand the systems their firms are running, and the results they are producing. We advise against parking regulation down the ranks. It won’t get the priority it requires.”
- Think beyond compliance. “Meeting the basics is just that. We are expecting firms to do much more in order to meet the spirit of the FMC Act. We anticipate firms will be running systems and practices that reassure them and us that the highest standards of conduct are apparent.”
- Read the FMA’s monitoring reports into different sectors of the industry as they come out. “They show firms the areas we are prioritising, and provide an insight into where we’ve found good and bad practices. We encourage firms to use other peoples’ experience to help them.”
- Expect quality feedback from the FMA. “We’re willing to brief at board level, or senior executive level, if required, on the results we are finding.”
Read full speech here.
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