Wholesale investments in the regulator's sights

FMA unveils work stream for coming year.

Friday, August 26th 2022, 5:13PM

by Eric Frykberg

The Financial Markets Authority (FMA) has included wholesale investment regulations in its programme of work for the coming year.

This was part of its Annual Corporate Plan which aims at three things.

To maintain a steady and consistent focus on building mature conduct in the sectors the FMA already licences and oversees.
Deliver core functions related to licensing, monitoring, and responding to egregious misconduct - particularly in relation to consumer harm.
Build capability to implement new legislation and take on increased responsibilities under its expanding mandate as a conduct regulator.

The work is in addition to well known aspects of its existing agenda, such as implementing the FAP programme, developing climate related disclosures and installing the Conduct of Financial Institutions, or CoFI process.

The work on wholesale investing was cited as an important development in a speech back in March by the then newly appointed Chief Executive Samantha Barrass.
She said then the wholesale investor market needed to be looked at. In its Annual Corporate Plan, the FMA has announced a thematic review of the entire system of wholesale investor classification.

Wholesale investments are large-scale investments, involving big companies with a turnover of at least $5 million, and attracting investments of at least $750,000 a time.

They often involve complex underwriting arrangements.

Such investments have much less protection than retail investments by Mums and Dads and this is one thing the FMA will look at.

Other work streams described in the Annual Corporate Plan include a cross-sector thematic review of governance within regulated entities – jointly with the Reserve Bank of New Zealand.

They also include Managed Investment Scheme (MIS) and Discretionary Investment Management Service (DIMS) sector risk assessments.

Cyber security and operational resilience are also involved.

“To ensure that we deliver value for New Zealanders, the FMA ….will need to elevate our capabilities – introducing new skills in data science, behavioural insights, and economics, Barrasss said.

“This is an opportunity to refresh how we define and deliver our approach based on the outcomes we want to achieve, and to measure our effectiveness and efficiency in fostering a strong and trusted financial sector that treats people fairly.”

Tags: FMA