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The long, hard road to good conduct

He came to the FMA full of hope for New Zealand's financial sector and says he'll leave the same way, but in between, it's been a hard slog trying to convince the industry that putting its customers first benefits everyone in the long run.

Friday, October 22nd 2021, 6:59AM 1 Comment

by Matthew Martin

Rob Everett.

Soon-to-be former Financial Markets Authority (FMA) chief executive Rob Everett spoke to an online audience as part of the Financial Services Council's ReGenerations Reimagined conference this week. 

He says when he first came to the FMA in February 2014 the Financial Markets Conduct Act was only a few months old and the FMA was busy with what he thought was the tail end of court proceedings and investigations that came out of the finance company collapses.

In late 2016 the FMA issued its conduct guide, Everett says "Whilst we only had licensing authority over certain sectors of the industry, we expressed the hope that other sectors would take note and start to change their operating set-ups".

"Quite frankly, we have not seen that. It took the Royal Commission in Australia and our conduct and culture reviews with the Reserve Bank to get some parts of the industry to take note.

"And even now it is requiring court proceedings and public sanctions to bring some firms fully to the conduct table.

"We have asked for - and received - more financial ammunition to bring complex cases resisted stoutly by well-resourced financial firms. And that is what we have been doing."

He says regulating the behaviour of the sector has been challenging and that conduct regulation is complex, "...at a high level, we all want fairness, transparency and integrity".

"There will always be crooks, fraudsters, outliers but I believe the bulk of the industry wants and aims for those things."

When asked back in 2014 what the biggest risk to the conduct regime for financial services was, he said "complacency".

"I'm not at all convinced that the industry or those in the legal and consulting professions paid much attention to my comments on arrival or the conduct guide in early 2017.

"So it was clear to me then that the conduct journey in New Zealand would be hard yards and would take a good while. I reckon we are no more than halfway there."

He says that complacency was laid bare by the Australian Royal Commission.

"And in many respects that was the spark we needed to make the industry, its advisers and consumers confront what could easily happen here.

"I have to say that whilst now in late 2021 I am confident in saying that real progress has been made, it has not been easy. As those who read our report into general insurance recently, we continue to be affronted at instances where see how little boards and senior management actually do until the FMA is at their door."

Everett says he does not believe the "outrageous misconduct" seen in Australia is endemic or systemic here.

"But it could be and even if it isn't, we do see sloppiness, lack of resource and conflicted behaviour across the industry.

"Investing in good technology, creating and maintaining effective processes and rigorous disciplines is hard work but it is required and it is expected."

But it's not all doom and gloom with Everett saying he is seeing good signs of progress in parts of almost every sector - remediation programmes are getting better at identifying and resolving past issues, and product design and marketing has started to shift away from serving the provider more than the consumer.

"We also see advisers, insurers, fundies and banks striving to serve customers during times of need and working hard to meet our expectations."

And he admits "the kaleidoscope of regulation of financial services is a major challenge" and the legislative environment is "complex and over-lapping and it is harder for some of you even than it is for us".

"This industry in New Zealand will flourish if it remembers who it serves," he says.

"That is every man, woman and child in New Zealand. If you work in financial services, you provide vital products and services to New Zealanders.

"Advice, insurance, banking, managed funds, investment products and platforms. Our economy cannot thrive without confidence that financial products and investments are offered and sold honestly and fairly."

Rob Everett holds a Master of Arts in Law from Cambridge University and worked in the capital markets department of international law firm Allen & Overy, spent 17 years at Merrill Lynch in London, Hong Kong and New York in a variety of senior roles and also spent a year as a director at regulatory consultants Promontory before moving to New Zealand at the end of 2013.

Tags: FMA FSC Rob Everett

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Comments from our readers

On 25 October 2021 at 9:08 am LNF said:
Sadly very little in any positive way, dwelling rather on a negative approach.
SBS departing head put it succinctly
Bank staff have ceased "selling"
So much experience being lost in the regulatory transition
The more needy population being ignored as uneconomic

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