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FMA role wider than preventing finance company collapses

The Financial Markets Authority (FMA) does not exist to prevent finance company collapses and risk must always exist in capital markets, according to FMA chief Sean Hughes.

Tuesday, May 24th 2011, 6:42AM 1 Comment

by Benn Bathgate

Speaking at the Professional Advisers Association (PAA) conference in Auckland last Thursday, Hughes said, "I don't believe it is the role of the regulator to prevent financial company collapses."

He said he was not an advocate of minimal regulation and "there must be an element of risk in the securities market."

Referring to the FMA's action against Bernard Whimp's low-ball share offers,  he said he was "pleased enhanced powers were used on the first day," and said the regulator "won't shirk" from acting on day one of the new adviser regime on July 1. 

Already the regulator has been examining advisers' websites to check for those advertising services they will not be authorised to conduct after July 1.

"It's not illegal - yet," Hughes said, though he did describe the behaviour as "cynical and opportunistic."

He also said one of the regulators roles would be to act in tandem with advisers and providers to raise financial literacy levels across the country - which he described as a "national tragedy."

Part of this process will involve the launch of what Hughes described as a public education campaign on July 1.

"We'll be telling them [the public] to expect more of their adviser," he said.

He also said a recent RaboDirect survey - which found usage of financial advisers falling among New Zealanders - reinforced the need to raise standards in the profession.

Hughes said he believed the FMA will be able to utilise its "arsenal of new powers" to help bolster confidence in financial markets, telling the audience of advisers that while the regulator "won't be on your doorstep every week" he was looking forward to working with them and providers towards improved perceptions of financial services.

Hughes said he believed by the July 1 deadline there would be 2,000 AFAs in the market and praised those advisers "who see the AFA as minimum standard."

Referring to a TV3 news article in the wake of the Whimp action, when a member of the public gave an incorrect explanation of what the NZX is, he said "what will make the difference is for that young man in the street to realise NZX is not a porn magazine."

"It's outcomes for clients I need to focus on, regulation is not about putting people in jail," he said.

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to

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Comments from our readers

On 24 May 2011 at 3:43 pm comrade said:
For those of you not completing education or not following the recommended prcoess beware. The line being taken be FMA is getting firmer and harder. In fact its typical about how these agencies run. Soften up the process with the nice - we will work with you - folks, and then get rid of them - bringing in the tougher guys who say - that wasn't the intention - its our way or the highway.
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