Regulator Series - The Financial Markets Authority

In our recent Regulator Series seminars we hosted the Financial Markets Authority (FMA) in Auckland and Wellington who spoke about the FMA’s approach to enforcement.

Rachael Manttan (Senior Solicitor, Enforcement) and Karen Chang (Head of Enforcement) presented on how the FMA decides what enforcement action to take; particular areas of interest for enforcement in 2017-2018; lessons from some recent cases; and the approach market participants should take when working with the FMA.

Points highlighted in the Wellington and Auckland sessions included:

  • The FMA’s risk- and harms-based approach to enforcement. The FMA does not have a ‘litigation by default’ approach and focusses its enforcement work on the cases assessed as posing the most significant harm.
  • Among the other factors necessarily taken into account when making enforcement decisions, the level of cooperation by market participants with the investigation is important and can impact on the level of enforcement action (or result in none being taken at all).
  • If something has gone wrong, market participants are encouraged to self-report to the FMA. Earlier reporting will carry more weight, but the FMA understands that it can sometimes take time to get to the bottom of issues.
  • Put customers’ interests first. This was emphasised several times. An approach that does so is not merely a pathway to compliant conduct, but a pathway to business success.
  • Particular areas of strategic interest for the FMA’s enforcement team in 2017-2018 include:
    • the continued scrutiny of secondary markets trading conduct;
    • monitoring the “regulatory perimeter” (activities the FMA does not regulate, but which represent a risk due to the potential to harm investors);
    • the fair dealing provisions in the Financial Markets Conduct Act 2013, which can be used to address perimeter issues;
    • building awareness of the importance of the FMA’s information gathering powers, the mandatory nature, and the consequences of non-compliance; and
    • promoting compliance with the Code of Professional Conduct for Authorised Financial Advisors.

Tips to ‘stay off the radar’:

  • Good conduct is naturally important. There is guidance from the FMA in FMA’s good conduct guide, but a key component is having a “customer focus”.
  • Keep up to date with the FMA’s publicly available compliance advice, warning letters, judicial precedents and (where relevant) decisions of the Financial Advisors Disciplinary Committee.
  • Follow the enforcement trends indicated by the FMA’s strategic priorities, media releases and other publications.

Thank you to Rachael and Karen for sharing their insights with us.