FMA priorities for the next 12 months

Cross-sector priorities

Removing unnecessary regulatory burden

• Continuing the pilot regulatory sandbox to facilitate innovation and testing of new products in a monitored environment.
• Progressing towards a single conduct licence.
• Further streamlining of regulatory returns.
• Continued collaboration with other regulators.

Understanding emerging risks and opportunities

• Private markets - deepening the FMA’s understanding of opportunities for enhanced investor returns and broader access to investments, and risks around valuation practices, liquidity and conflicts of interest management.
• Virtual assets including tokenisation - publishing research on retail adoption in New Zealand, seeking feedback on how offerings align with regulation, continuing to advance the need for a New Zealand legal framework.
• Operational resilience - deepening the FMA’s understanding of operational resilience practices for derivatives issuers, Discretionary Investment Management Services (DIMS), peer-to-peer lending, crowdfunding and insurance providers; considering whether further guidance should be issued and continuing to focus on technology systems resilience in the banking and market infrastructure sectors.

Ensuring customers are treated fairly when things go wrong

• Monitoring how well firms are highlighting consumers’ right to raise concerns and have them addressed, and how easy their complaints processes are.
• Continuing the FMA’s focus on remediation of harm, particularly for banks, insurers and non-bank deposit takers.

Disrupting scam activity

• Continuing pilot partnerships with banks and technology firms to achieve faster information sharing, tackle emerging scams and remove scam content.
• Publication of scam warnings and information.

Advocating for reform when assets held in custody

• Continuing engagement with the Ministry for Business, Innovation and Employment (MBIE) for law reform.
• Raising the FMA’s visibility in custodial sector.

Sector specific priorities

Financial advice 

Conduct impacting consumers in vulnerable circumstances

• Focusing on mortgages, and life and health insurance products, sold to consumers through misleading or fraudulent activity, including those taking advantage of vulnerable people.

Consumers and investors understand fees, incentives, and commissions

• Ensuring Financial Advice Providers (FAPs) are disclosing appropriate information (including by reviewing disclosures).
• Conducting a thematic review to increase understanding of FAP business models and remuneration structures.

Effective protection of client assets

• Monitoring the robustness of FAP client money or property custody services and the oversight arrangements if outsourced, including governance and supervision of the service, and how reports are provided to clients.

Challenges and opportunities to improve accessibility of advice (including through AI technology)

• Reviewing whether regulatory obligations are a barrier to accessing advice, and giving consideration to consumer preferences and demographics, innovation and digitisation, remuneration structures and advice business models, and ease of provision of regulated financial advice.

Banks and non-bank deposit takers 

Proactive product reviews for existing products to ensure consumers’ needs and objectives are met

• Ensuring firms proactively review existing products and services to confirm they align with customers’ requirements.
• Focus on conduct resulting in customers not receiving promised products or services.
• Engaging with firms that have not self-reported material issues related to fair treatment, noting that an absence of self-reporting can be a heightened indicator of conduct risk.
• Publication of data on savings and lending product interest rate changes to help consumers better understand bank responses to Official Cash Rate changes.

Insurers 

Proactive product reviews for existing products

• Ensuring firms proactively review existing products and services (to confirm they align with customers’ requirements, and that staff understand the suite of products within the business).
• Encouraging firms to consider legacy products and litigation trends in cases taken against insurers, to ensure that the root cause of issues is identified and escalated (including, where material, to the FMA), and that remediation is prioritised.
• Prioritising engagement with firms that have not self-reported material issues related to fair treatment of customers.
• Focus on conduct resulting in customers not receiving promised products or services.

Communication with consumers on product and service offerings

• Focus on insurers’ obligation to communicate to consumers in a timely, clear, concise and effective manner, including on product exclusions, fees and premiums.
• Considering whether further guidance would support improvements in communication practices during all parts of the insurance life cycle, including inception or renewal, and when a claim or complaint is lodged.
• Engaging with providers to understand how FMA can support the successful implementation of the Contracts of Insurance Act 2024.

Capital markets

Tackling misleading disclosure by wholesale issuers

• Ensuring disclosure (including advertising) is not false, misleading or unsubstantiated, and considering the full range of regulatory tools to respond as necessary.
• Particular focus on interpretation and application of law around eligible investor certificates, awaiting a High Court ruling on this issue.
• Keeping policy settings under review, given the changing distribution methods and nature of wholesale offers.

Clear expectations for ethical investment disclosures

• Publishing updated guidance on FMA’s expectations for ethical investment disclosures and advertising.
• Taking action where ethical investment disclosures are materially misleading, deceptive or unsubstantiated.

Insider conduct and continuous disclosure obligations

• Continuing to work closely with NZ RegCo to detect and act against market misconduct.
• Prioritising investigation of NZRegCo referrals of potential insider conduct by senior managers and directors, and referrals concerning continuous disclosure obligations in changing economic environment.
• Using range of regulatory tools to respond to misconduct and to support appropriate conduct through participant engagement.

Supporting policy changes for capital markets settings

• Continuing to support MBIE to advance capital market policy changes, including work to:
  • make disclosure of prospective financial information for equity IPOs optional
  • consider issues and options to facilitate KiwiSaver providers investment in private assets 
  • consider adjustments to climate related disclosures regime, and
  • review certain product disclosure requirements, auditor liability and continuous disclosure liability.

Investment management

Clear expectations for ethical investment disclosures

• Publishing refreshed guidance on FMA’s expectations for ethical investment disclosures and advertising.
• Taking action where ethical investment disclosures are materially misleading, deceptive or unsubstantiated.

Consumers and investors understand fees, incentives, and commissions

• Engaging with managed investment schemes (MIS) to ensure fees, incentives and commissions are well understood.
• Monitoring DIMS providers to ensure customers are receiving clear and consistent reporting about fees, rebates and commissions.

Effective protection of client assets

• Assessing how licensed supervisors have responded to the 2019 thematic review of MIS custody arrangements, including any delegated custodial functions.
• Examining DIMS oversight of custody arrangements, including reviewing governance and supervision of the client money and property service, and processes for compliance with statutory obligations.

Ensuring consumers’ and investors’ interests are at the forefront of decision-making

• Engagement with supervisors to understand the findings of their MIS manager liquidity risk management monitoring activities and consider if further FMA insights are needed.
• Monitoring financial statements, providers and market practices relevant to related party transactions, particularly for DIMS and registered MIS.

Consumer credit

The FMA expects that responsibility for the consumer credit sector will be transferred to it from the Commerce Commission later this year and will publish its initial priorities for this sector closer to the time of transfer.