How to Handle an FMA Audit

The issue of an FMA audit is the subject of the latest Compliance Refinery Director Bootcamp podcast featuring Melanie Purdey and the firm’s CEO Steven Burgess.

Burgess says firms shouldn’t been spooked by a letter from the regulator giving four weeks’ notice of an audit, saying some companies are picked at random. Even so, he says an audit can take four to five months before it is completed.

“Usually what happens [when the audit letter is received] is that there is a little bit of panic,” says Burgess. “Everybody gets a little bit worried, ‘have we done something wrong..?’.”

However, Burgess says that in some cases a firm may be high on the FMA’s risk list “…you won’t know that at the start”.

“The FMA does consider some businesses to be a higher risk than others, they do have a methodology for assessing that,” he says.

Burgess says lots of firms significantly under-estimate the amount of time that’s involved in complying with an FMA audit.

“There will be a document request list, and so you have to go over that,” he says. “It can take up to 20 hours’ work to complete a response to the first letter from the FMA.

“It can be quite disruptive to a business in preparing all the information requested in the format they want…It can take a little while before they even come in to see you.

“And there is the stress, even if you don’t think you’ve done anything wrong. One thing we see, when a business is under stress, is that their productivity drops, and that’s not just with the directors, but the advisers as well.”

Burgess’ advice is that there will be a cost in time and money to take part in an FMA audit, but the quicker this is accepted, the better.

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