Yesterday the Financial Markets Authority (FMA) released its Annual Corporate Plan for 2022/23 (ACP), which rings in a period of “significant change” within the financial services industry and the FMA alike. In it, the FMA sets out its key priorities, along with upcoming legislative changes and reviews.
Links to the ACP and media release are available here and here.
Who needs to read it? Why?
The ACP is relevant to FMA supervisors and entities which are regulated by the FMA. It indicates how the culture and expectations of the FMA will develop over the next year, and signals changes to prepare for.
What does it cover?
Key priorities and intended work programme
In the ACP, the FMA identified three key areas it will be delivering on in the current financial year. These are;
- maintaining a steady and consistent focus on building conduct maturity in the sectors the FMA already licenses and oversees;
- the delivery of core functions related to licensing, monitoring, and responding to egregious misconduct – particularly in relation to consumer harm; and
- building capability to implement new legislation and taking on increased responsibilities under its expanding mandate as a conduct regulator.
Recently appointed FMA Chief Executive Samantha Barrass highlighted how the economy is continuing to operate against a “backdrop of uncertainty,” and as such it is all the more important that the FMA works with the industry to ensure the success of New Zealand’s financial sector. This intention offers supervisors and service providers an opportunity to work collaboratively with the FMA in achieving its key priorities, and influence how the regulatory regime is implemented.
New legislative regimes ahead
The FMA identified the upcoming legislative regimes which will partially define its work over the next year;
- the Financial advice regime – full licensing will be coming into effect from March 2023.
- Climate-related Disclosures – the FMA will be developing standards and consultation through 2023, with the first climate-related statements being due in 2024.
- Conduct of Financial Institutions (CoFI) – with conduct licensing opening in 2023, and fair conduct programmes and obligations coming into effect from 2025.
In reference to CoFI, Ms Barrass said that it is part of the FMA’s increasing focus on fair outcomes for consumers and investors. Ms Barrass emphasised how CoFI goes towards placing conduct obligations “firmly at the heart of a fair financial system,” and she stated an intention for the FMA to become more outcomes-focussed. The upcoming development of a new Conduct Framework will play a key role in achieving this focus, and will include a significant engagement programme regarding the core outcomes for consumers and markets. Through this process the FMA hopes to develop its understanding of the drivers of consumer behaviour, which will inform its regulatory interventions.
Regulatory priorities
The ACP goes through the regulatory priorities of the FMA over the next year across various sectors, including;
- a thematic review of the wholesale investor classification;
- a cross-sector thematic review of governance within regulated entities – jointly with the Reserve Bank of New Zealand, focussing on the boards of regulated entities and their ability to effectively govern and provide oversight;
- a Managed Investment Scheme and Discretionary Investment Management Service sector risk assessments to inform future planning and thematic monitoring;
- consulting on a new set of regulatory return questions for the future monitoring of Financial Advice Providers;
- working on cyber security and operational resilience, including consulting on a new FMC Act standard condition;
- building on the FMA’s “value for money focus” by updating guidance on performance fees; and
- publishing follow-on guidance about liquidity risk management for managed funds following consultation.
These priorities are intended to target the “most significant risks and opportunities” that the FMA identified in the regulatory environment. They will direct the activities the FMA undertakes in the coming year and dictate the allocation of its resources.
Our view
Ms Barass stated in the ACP that her “overarching focus is ensuring the FMA is ready to deliver on its significant remit expansion, and that as a result we become a world-leading conduct regulator.” She acknowledged how the FMA has been given more funding in order to carry out its enhanced remit, indicating that industry participants can expect broad engagement and regulation from the FMA. The ACP highlights that the upcoming year is an opportunity for supervisors and service providers to engage with the FMA to ensure compliance and a comprehensive understanding of the regime as it develops.
What next?
If you have any questions in relation to the ACP and the upcoming developments in the financial services sector it identifies please contact one of our experts.
This article was co-authored by Elise Plunket, a Law Clerk in our Financial Services team.
