The Financial Markets Authority (FMA) has issued its first Financial Conduct Report (FCR). The purpose of the report is to be transparent about the conduct that it sees and the regulatory priorities it will focus on over the coming year. Regardless of size, businesses don’t operate in a vacuum and are increasingly being impacted by micro and macro forces. Highlights from the FCR include the following plans.
Reported investment-scam losses reached NZ $194 million last year. The FMA aims to widen partnerships with the banking and technology sectors to enable faster information sharing so suspect domains and accounts can be frozen sooner. They will continue to publish scam warnings, case studies and information on the evolution of scams on its website.
Recent outages in banking and cloud infrastructure have shown how quickly cash-flow can seize up. The FMA expects all regulated providers to invest in resilient technology and to monitor critical service partners so disruptions don’t spill over to merchants and payrolls. The FMA will continue to focus with the RBNZ on ensuring technology systems critical for the stability and performance of New Zealand’s financial system are resilient.
Only 29 percent of New Zealanders know how to complain to a financial provider; boosting that figure is a priority. The FMA will be looking at how clearly firms signpost the right to and how to complain and how swiftly they remediate systemic problems. Effective complaints processes lead to greater trust and process improvement.
The FMA will publish data on interest rate changes to improve transparency, which could lead to clearer explanations of how overdraft or term-deposit pricing moves with the Official Cash Rate. Under the new Conduct of Financial Institutions regime, banks and non-bank deposit takers must prove that loans and deposits still meet customer needs. Engagements with firms that self-report issues will occur and engagement with firms that do not appear to be self-reporting will be prioritised.
Insurers will be told to revisit legacy policies and to explain cover, exclusions and price changes in plain language across the policy life-cycle. That should reduce “surprises” at renewal or claim time—especially on business-interruption and key-person cover.
A thematic review will check whether financial advisers are upfront about fees, commissions and conflicts to ensure transparency on pricing. Gaps or delays in disclosure will attract enforcement attention.
Wholesale offerors will face action if advertising is
misleading, while ethical funds must substantiate “green” or “impact” labels. Better disclosure helps owner-operators compare opportunities without the need for specialist analysts.
After several high-profile frauds, the FMA is pressing for law reform to safeguard client money and property and will scrutinise outsourced custody arrangements.
The FCR makes for an interesting read, if only a ‘skim’ to get a sense of what areas the FMA is focussing on as part of setting higher expectations for banks, insurers, advisers and fund managers.