Hughes prepares to saddle up

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Financial Markets Authority boss Sean Hughes has, somewhat unexpectedly, announced he's only doing one three-year term in the role. Good Returns publisher Philip Macalister reflects on the FMA's early years and Hughes's performance.

Friday, July 12th 2013, 9:00AM 1 Comment

by Philip Macalister

So Sean Hughes has decided to saddle up his horse and ride out of town.

His early announcement of his decision not to do a second term as chief executive of the Financial Markets Authority has already got people writing their reviews about his performance.

As you would expect they are generally positive.

It will be interesting to see what the financial advisory sector will make of his three-year tenure in the role.

I suspect many advisers will remember him for the Cowboy ads that ran soon after the FMA was established. They were by far and away the most read and commented on stories on Good Returns in that year.

In adviser land one of the things that will be discussed, and should be debated, is the level of resources the FMA puts into policing this sector. It seems there is considerable resource and cost yet, despite reasonably heavy handed comments that advisers will be stuck off, disciplined, fined or whatever, we haven’t seen many cases of this.

Indeed we still haven’t seen an adviser appear before the Financial Advisers Disciplinary Committee yet.
It supports the contention I have made for years that advisers in New Zealand are pretty straight up. Sure standards and professionalism can be raised and that has been happening.

The FMA, and Hughes, can claim some credit for that. So can advisers.

Foundations in place
Reading the comments he made to us, and to other media, he clearly sees his role here as setting up the organisation and putting the building blocks in place.

I think he is right and that is what he has done successfully. The FMA has clearly defined what it wants to do and regularly repeats its messages so people don’t forget them.
Reading between the lines of the various interviews one can’t help thinking there is something else behind his decision. Hughes has been passionate about his role and walking away at this point is a real surprise.

Has investor confidence increased?One of the most important things he can be measured against is whether the FMA, under his guidance, has increased investor confidence and the public are better informed and more active in the market.

My take on this, based partly on anecdotal evidence, like talking to my electrician the other day, is that there hasn’t been a marked shift here.

Maybe some improvement, partly due to the end of the GFC, but not a quantum step up.

But to put that into perspective it’s not something that will happen overnight.

It’s probably not helped by events like the Mighty River Power share offer either. Fortunately for Hughes the moribund share price is not something he is responsible for, it is more of a government issue. I can tell you there are plenty of unhappy first time sharemarket investors out there.

Big black mark
Undoubtedly, and we have seen this since his announcement, the big black mark is Ross Asset Management.

I’ve debated this at length with people and still think that it was a failure by the FMA. They should have been onto DIMS, especially after ponzi schemes like Bernie Madoff in the United States and the interesting case of our own, departed, Allan Hubbard. There were enough signs, and I know, from listening to FMA people, Ross blind-sided the authority.

I think it would be unfortunate is that event is what Hughes we remembered for.

Hughes has done a far better job and raised the bar significantly from what the former head of the Securities Commission achieved. He should be applauded,

My hope is that instead of getting another Australian running our markets we get a Kiwi.

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