[Weekly Wrap] Has the FMA over-stepped the mark?

Sunday, July 20th 2014, 4:43PM 2 Comments

Regulation is something the financial advice has to accept. What is starting to become less acceptable to many is how the scope and depth of regulation gets broader and deeper each time the regulators, primarily the FMA, starts making some interpretations.

This is an issue which I've heard many times over the past couple of years. Last week it bubbled to the surface again when the FMA provided guidelines around AML/CFT reporting by way of a FAQ.

Highly experienced and regarded financial adviser Murray Weatherston

Here's what is interesting about this AML issue. It came to light at the recent SiFA conference when Weatherston gave a session on how to complete the necessary AML forms. At section six he made some assertions about what he felt was necessary for compliance. Fellow practitioners in the room had different ideas.

Ths was an example of advisers taking a practical approach to yet-another compliance issue.

What it illustrates is that there is a gap between how advisers, who work at the coal face, come up with, and what regulators in Auckland and Wellington decide. It illustrates a potential lack of practical expertise within the regulators.

But that's not the only issue. This AML question has led to what Weatherston calls "Regulation by FAQ". His question, and a question others have asked, is simple. Are the regulators expanding the breadth and depth of regulation with tools like Guidance Notes and FAQs? Some clearly think that is the case.

One of the issues we face with stories like this is what comments should be approved? Quite a few comments made on stories don't make it through the moderation process for various reasons, often because they are too personal. There have been a number of comments criticising the FMA and we decided these should be approved as they show what readers are thinking.

A comment, made by an industry veteran, suggested it would be good if the FMA would respond to questions and criticisms made. We know Good Returns is read by the powers that be and invite them to answer questions and clarify issues.

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Comments from our readers

On 21 July 2014 at 8:47 am Fred said:

The FMA should respond promptly to what appears to be a clear instance of its misbehaviour - a retraction, correction and perhaps the FMA's thanks to the courageous Mr Weatherston are due.
The FMA's role should not be solely to deliver business to the big end of town.

On 21 July 2014 at 12:04 pm Brent Sheather said:

Philip hits the nail on the head here when he says “it illustrates a potential lack of practical expertise within the regulators”. Exactly. This lack of expertise amongst the movers and shakers was obvious as early as the initial decisions of the Code Committee, the content of the ridiculous exams set for becoming an AFA where you had to guess which wrong answer the examiners thought was right etc etc.

Look at the FMA Board and there is no one who has a good knowledge of what goes on at the coalface for financial advisers. There are a few stockbrokers but we won’t delve into their experience.

Look at the FMA executives and most have institutional investment backgrounds. In the US various ex-SEC executives are on record as saying that no SEC exec who leaves the SEC should be allowed to work for a bank they have regulated. Shock horror – FMA executives and directors move between the banks like they are part of the same conglomerate …. Hmmmm.

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