Sheriff Hughes ditches his horse for FMA departure

Sean Hughes arrived at the FMA as the sheriff with all guns blazing. Well that is how many in the financial advice world remember his arrival. When he rode out of town just before Christmas he was a much modern and diplomatic man who left for his home in Melbourne.

Friday, December 27th 2013, 9:33AM

Hughes and the FMA have had plenty of criticism from the financial advice world as we have witnessed here. Some of the comments seem unwarranted. Maybe they show some misunderstanding of what Hughes has achieved in his three-year reign.

In his farewell speech at the organisation’s quarterly Stakeholder Briefing in December he told guests that regulation should not be a panacea for all ills but an inducement and encouragement for willing investors to participate.

However, he said a regulator should not always use a "hard stick" to punish those who broke the rules but a "firm stick".

I also learned about a speech he made to the Workplace Saving conference earlier in the year. To me it is a must read for everyone who reads Good Returns.

One of the issues which put a target firmly on the FMA was the David Ross Ponzi scheme and DIMs.

Ross and DIMS caught the FMA out. It is clear they had little idea about DIMs and the potential risk they carried until Ross was exposed.

It highlights that the FMA and its staff are still getting to understand the intricate nature of the financial services sector and walking the beat isn’t always going to catch the bad eggs out there.

But to their credit Hughes and other senior managers at the FMA have openly acknowledged they can never stop another Ross Asset Management situation happening again.

Likewise Hughes accepted some responsibility for what happened. He is also quick to point out that when the FMA did find out it acted quickly. Indeed he says: “You won't find a regulator that has acted faster.”

In earlier days of his reign the answer to that question would, quite possibly, have been quite different.

No one knows what the FMA will look like with a new chief executive and a new set of laws, the Financial Markets Conduct Act, to administer.

One new theme which emerged from the FMA recently is that it has been doing a lot of work of risks and areas for potential market failure.

One these which has been reported is a collapse in house prices or the sharemarket. Hughes rightly pointed out there are risks around people having too much money in one type of investment.

But it has also looked at other areas such as KiwiSaver and money market funds.

Hughes, and the FMA have
One of the things we often ask people is what it there impression of the FMA what it is doing and how have their interactions been?

Reflecting back on the answers offered over the years there has been a marked shift in feeling. It has gone from a wary and nervous tone to one which is much more positive and supportive.

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