2 October 2015

The FMA publishes first annual report under the new regulatory regime

The Financial Markets Authority (FMA) 2015 annual report marks a turning point for the FMA and for New Zealand’s financial markets. This is the first report published under the fully implemented Financial Markets Conduct (FMC) Act and highlights activity for the 12 months to 30 June 2015.

The report demonstrates the steady re-organisation of priorities and focus at the FMA as the operating model for conduct regulation begins to emerge.

Rob Everett, FMA chief executive, said “While the new regime is still in its infancy, we are pleased with the progress in establishing the framework for delivering a modern and flexible approach to regulating financial services.

“The new licensing framework and our focus on the conduct of the regulated sectors give us a bigger mandate, and with that comes higher expectations.

“The FMA will be demanding in the standard of conduct we want to see from providers of financial services and products and, in turn, the industry, investors and stakeholders have high expectations for the regulator to achieve results. This report shows a gear change in the new regime as the FMA and firms begin to make full use of it.”

Some of the changes apparent in the FMA’s activities this year include:
• extensive use of formal consultations as the FMA fine-tunes the application of regulations
• significant work on readying the relevant sectors for licensing under the FMC Act and in assessing the applications being made
• public companies improving their disclosure in offer documents, with 24 new-style Product Disclosure Statements, which are easier for investors to use
• an MoU between the FMA and NZX to ensure a strong operational relationship aimed at driving confidence in our financial markets and to build on the improvement in the frontline regulatory systems of NZX
• increasing capital-raising opportunities either through newly licensed equity crowd funding and peer-to-peer platforms, or other simplified capital-raising mechanisms such as same-class offers
• the FMA using some of the specific conduct provisions – including warnings – in the FMC Act, where it takes preventative action to mitigate or stop potential harm. This includes initiating a civil case using the powers that allow the FMA to ‘stand in the shoes’ of investors.
Mr Everett said the FMA remained focused on applying its resources to the most significant harms and risks to the fair, efficient and transparent operation of the markets.

“The challenge remains to continue to deliver on our expanded remit with the resources we have available. Publishing our Strategic Risk Outlookwas a significant step that has enabled us to explain how we apply our resources and indicate where we will be focused in the medium term.

“Our aim across all our activities is to increase confidence in financial markets and to support economic growth in New Zealand.”

Other key achievements this year include:

• enforcement activities that recovered over $51 million in compensation for investors
• FMA-imposed sanctions that addressed market conduct, integrity and sales practices
• an investor capability strategy completed and published, aligned to the government statement on building financial capability in New Zealand.
The financial statements for the 2015 year showed that revenue was $30.2 million, expenditure increased slightly above forecast to $32.7 million, up from $29.4 million in 2014. This increase reflects the considerable effort required to implement the FMC Act and to assist newly regulated populations in preparing for the new regime. The deficit of $2.5 million for the year has been covered by accumulated funds and the FMA continues to manage resources carefully.

Read the full report here.

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