FMA focus - Money laundering, cybercrime, disclosure and more

The Financial Markets Authority (FMA) has its work cut out for it over the next 12 months dealing with a range of issues from insider trading, false advertising and the CoFI Bill to cybercrime, KiwiSaver and compliance.

Tuesday, July 20th 2021, 3:18PM

by Matthew Martin

FMA chief executive Rob Everett.

The FMA has published its Annual Corporate Plan, which sets out the FMA’s activities for 2020/21 and promotes the regulator’s strategic priorities, addresses regulatory risks and harms, and monitors outcomes.

In his introduction to the report, FMA chief executive Rob Everett says while New Zealand saw major economic disruption due to the Covid-19 pandemic, it was not as severe as predicted, and financial services firms generally appear to have managed the crisis well.

"However, the work is not done. The FMA and the firms we regulate are operating against a backdrop of economic uncertainty, significant regulatory change, adoption of new ways of working, and changes in customer and investor preferences, including how they access financial services.

"Areas where we see the need to respond to rapidly developing conditions include products and services that have ESG (environmental, social and governance) aspects, fintech innovation, and the risks from cyber attacks or technology failures.

"In addition, as both we and the industry navigate the recovery, our key focus must be on the customer. At the heart of good conduct is understanding and responding to changing customer needs," says Everett.

Among the numerous areas of focus for the FMA is concern over the growing number of major cyber incidents across the public and private sectors, including in financial services and the cyber-attack on the NZX in August of 2020.

It will also be closely monitoring an increase in the number of referrals and complaints relating to insider trading and market manipulation.

"We will also continue to improve transparency of entities and investment products through our work on disclosure, audit quality, and financial reporting," the plan states.

In terms of investment management, the FMA says low interest rates are driving investors to search for better returns which could lead to problems for investors "...who are not aware of or misunderstand the risks of managed investments compared to the term deposits they are exiting".

"Competition for these investors may see providers over-emphasising potential returns in promotions, advertising, social media, and other informal means of disclosure.

"In addition to seeking and addressing poor conduct from firms, our efforts throughout the pandemic and through the recovery will focus on increasing investor understanding of the long-term nature of investments, particularly KiwiSaver, and highlighting the importance of being in the right fund based on risk appetite."

The plan also states the FMA is preparing for legislative changes with the Financial Markets (Conduct of Institutions) Amendment Bill (CoFI) currently progressing through Parliament.

CoFI is expected to pass before the end of 2021, with the regime anticipated to come into force from 2023.

And, in December this year, the six KiwiSaver default providers (four reappointed and two new providers) will replace the current nine.

"The default funds will follow a balanced asset allocation and have a responsible investment mandate. This represents a significant transition for the industry," the plan states.

"In April 2021 we released guidance outlining our expectations for fund managers to review their fees and value for money with their supervisor at least annually.

"The FMA and supervisors will soon begin implementing the guidance with pilot groups of KiwiSaver and MIS (managed investment scheme) managers."

 

Tags: CoFI compliance Covid-19 cyber security FMA KiwiSaver NZX Rob Everett

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