The FMA has published its updated approach to Outcomes-Focused Regulation after considering wide ranging feedback from financial services firms, consumer groups and law firms.
A statement from the regulator says an outcomes-focused approach means the FMA focuses its resources on the end results that regulation is aiming to achieve for consumers and financial markets.
It notes that in November 2023, it published its approach to outcome-focused regulation and received more than 50 submissions from a range of interested parties (see: FMA Opens Consultation on Fair Outcomes for Consumers).
“The consultation closed in March 2024, and the FMA has carefully considered and adjusted its approach to reflect the feedback.”
Clare Bolingford, Executive Director, Regulatory Delivery, says the approach “…focuses on the most significant risks and opportunities for New Zealand businesses, investors, and consumers, helps reduce unnecessary regulatory burden on the industry, and provides market participants with greater flexibility in meeting regulatory obligations.”
In the public consultation last year, the FMA sought to test what fair outcomes are for consumers and markets.
…we have reframed the outcomes in response to the feedback we received, to clarify them and to better show how they link to the FMA’s main statutory objective…
“In this document we have reframed the outcomes in response to the feedback we received, to clarify them and to better show how they link to the FMA’s main statutory objective and the purposes of our legislation,” Bolingford says.
The document itself shows the seven key outcomes as:
- Fair services: Financial products and services deliver what is promised, expected benefits reflect risk, and providers do not improperly take advantage of information or power asymmetries
- Quality ongoing service: Where financial products and services create an ongoing relationship with a provider, the interests of the investor or consumer are considered throughout the relationship, e.g. in complaints handling, claims assessment, management of investment funds
- Improved access to products and services: Our financial markets deliver services and products that meet New Zealanders’ needs. This promotes confident participation in financial markets
- Resilient markets and providers: Businesses, investors and consumers have confidence in the resilience of infrastructure, markets and providers to safeguard their assets, money and data
- Market innovation and growth: Innovation and flexibility are promoted while market integrity and investor and consumer interests are preserved, and market efficiency and investor and consumer choice are improved
- Well-informed investors and consumers: Investors and consumers receive accurate, timely and useful information that enables them to make well-informed decisions, helps improve their financial capability, and empowers them to take responsibility for their financial decisions
- Market integrity and transparency: New Zealand’s financial markets have a strong reputation for market integrity and honesty, which promotes their ongoing development and attracts investment from New Zealand and overseas. Financial crime such as market manipulation, insider trading, and frauds and scams are not tolerated
The full FMA document says that to implement an outcomes-focused approach the authority needs “…better dialogue with our stakeholders about the most important risks to the outcomes we seek for New Zealanders and our markets. Part of this is ensuring we are transparent about the risks we see and our priorities for addressing these.”
To help achieve this, it will publish an annual Financial Conduct Report that will:
- Set out its regulatory priorities for the year ahead
- Inform market participants about the key risks to outcomes that it has identified, at both a market-wide and sector level
- Explain how these risks have informed the FMA’s regulatory priorities for the year
- Provide insights for stakeholders from its supervisory and response work – highlighting practices that support better outcomes as well as areas where attention is needed
The full document also details the FMA’s new supervisory approach rolling out from 2025. It says key features of this include:
- Aligning its supervisory approach with the regulatory priorities as outlined in the Financial Conduct Report and with our assessment of sector and firm risks, using the data we gather from firms, e.g. regulatory returns, and intelligence from supervisory and response work
- More forward-looking supervision, to improve its knowledge of firms and their business models, and understand and influence how firms manage risks to the outcomes it has identified
Click here or on the image below to see the full document.
