New Zealand Law Society - Sector body demands slack financial services providers step up to the mark

Sector body demands slack financial services providers step up to the mark

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The Financial Markets Authority’s (FMA) has revealed that a group of financial services providers are failing to fulfil the conditions of their licence.

In its annual report, the FMA describes the situation as “not satisfactory” and says it expects those providers to step up to the mark.

“In 2016, our results reflected that most financial services providers had come through FMC Act licensing for the first time. Most had to take remedial action before they could be licensed, or had conditions attached to their licence that required our follow-up,” the report says.

“This year, there were still some providers going through licensing. But in other instances, our follow-up work revealed that some providers had not fulfilled the conditions put on their licence. While we accept that overall conduct and conduct regulation is at an early stage of maturity in New Zealand, a provider not fulfilling a condition of licensing is not satisfactory, and we expect that to improve.”

The FMA says it imposes a time limit, typically, three to six months, for meeting the conditions. If progress has not been made within the timeframe, it expects the entity – and its supervisor if there is one – to report that as a breach. The FMA says it can use the FMC Act, such as imposing tighter licence conditions, formal direction orders or even removing licences." the annual reports says.

High standards of behaviour

The report covers the work the FMA’s frontline supervision and monitoring teams have carried out with licensed businesses and where further work is required.

“We have outlined our expectations for industry conduct. We are committed to contributing to high standards of behaviour,” says Rob Everett, FMA Chief Executive.

“Therefore we expect a healthy debate – and sometimes resistance – about the influence we want to exert on how providers engage with their customers. We encourage, guide, and occasionally compel, providers and intermediaries to think about how they are serving their customers.

“We also want to encourage and help investors to make well-informed decisions. We must work on both sides of the fence to create a safe and more transparent environment,” he says.

Other major developments include:

  • Completing licensing of regulated services in December 2016, with 201 of 253 licence applications approved, 
  • Publishing the conduct guide for industry and investor entitlement material, 
  • Successfully bringing civil action against Mark Warminger for market manipulation.

The report also describes how the Authority has changed its performance measures to provide more meaningful insight into whether it is achieving its regulatory objectives. The new measures will be first reported on in the Annual Report 2018.