FMA extends regulatory relief - focus on good conduct

While the covid crisis and regulatory change have hit many financial service providers hard it's also impacting the country's regulators - none more so than the Financial Markets Authority.

Wednesday, September 29th 2021, 6:57AM

by Matthew Martin

Liam Mason.

The Financial Markets Authority (FMA) and its staff are coming under increasing pressure as its regulatory mandate grows - on its plate right now are the new licensing requirements under FSLAA, conduct and culture reviews, preparations for the implementation of the new conduct of financial institutions regulations (CoFI), changes to KiwiSaver default providers and monitoring, plus the new laws around climate change reporting.

This is coupled with recent negotiations with the government around essential services and what that means for the financial sector while under lockdown.

In a recent 'FSC Connect' webinar, hosted by the Financial Services Council and its chief executive Richard Klipin, some of the FMA's top brass gave their views on how the latest lockdown has affected the financial industry and how they were trying to manage their own workloads while not putting too much pressure businesses.

The FMA's director of regulation and acting general counsel Liam Mason led the discussion saying, like others in the sector, the FMA has "...a large slate of regulatory reform and implementation in front of us...and are coming at us at a rate of knots".

"We have nonetheless looked to delay a number of initiatives and activities, [and] we've also signalled...that we are once again willing to extend regulatory relief where needed."

Mason says the FMA will continue to give priority to work ensuring products and services are true to label and provide value for money.

"And we are responding to the continual growth of retail activity in the markets, upping the support we have for inexperienced investors helping them have confidence but also understand the potential pitfalls that come along with some of the new ways that markets can be accessed today."

He says the duration of the current lockdown has been a challenge, especially for those in Auckland.

"We are very aware of the liberty the rest of the country has in terms of both our own staff and the people we service."

Mason was joined by the FMA's director of banking and insurance Clare Bolingford, director of investment management Paul Gregory and Barbara Pearse from its monitoring and financial advice team.

Bolingford says conduct is key and the FMA is keeping a close eye on how the behaviour of companies change over time.

"Conduct really matters as it's what the customer experiences in practise...and we don't see this as complying to a minimum standard."

She says the FMA has found there are mixed practices across the industry and they are working hard to ensure the root causes of issues are identified and fixed.

"We are also learning from our mistakes...and we want to work with firms on this and show them what good practices are."

She says businesses should know what the FMA's expectations in terms of conduct are and simply is about "putting customers first across the lifetime of a policy".

This means businesses should have good systems and controls in place and good two-way communication between front line staff and management.

Pearse says monitoring has been "rejigged a bit due to covid" and the FMA is "mindful of the regulatory burden being placed on entities".

"When we see people doing good, we want to share those examples," Pearse says.

"Maybe it will work for others leading to better outcomes."

However, she says the FMA will have no patience for people who are trying to take advantage of the lockdown situation, saying that the number of scams being reported is also going up.

Gregory says his team is about to start a default KiwiSaver provider transition course with MBIE and what that means in terms of expectations for the transition, service level agreements, and traffic in and out of default funds and providers.

Plus a final version of the FMA's advertising guidelines for ESG products and services is also imminent.

Tags: CoFI conduct Covid-19 FMA regulation