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FMA didn't disclose Booster conflict

The Financial Markets Authority failed to address conflict of interest issues during the KiwiSaver default review process.

Friday, March 18th 2022, 3:23PM 4 Comments

An independent review published today says a conflict of interest held by former chief executive Rob Everett was not properly disclosed.

Everett’s wife’s sister’s husband is Gary Scott, who is chief financial officer at Booster. Booster was one of the incumbent default KiwiSaver providers and retained that status after the review.

Everett had previously disclosed this conflict of interest when he took up his role with the FMA in 2012, but it was not raised with the Commerce Minister or the FMA board during the review process.

The independent review was kicked off by Attorney General David Parker after questions were raised by NBR reporter Tim Hunter. The review was conducted by barrister Kristy McDonald and has concluded with a 50 page, heavily redacted, report.

McDonald concluded there were “shortcomings in the way in which this conflict of interest was managed by the FMA and the chief executive” but they did not have any impact on the advice provided to the minister.

The regulator’s advice in relation to default KiwiSaver providers was limited to whether there were any regulatory compliance issues that may affect the ability of the proposed managers to act as default providers. It did not recommend which to choose.

While Everett disclosed his conflict when he joined the regulator the FMA board did not have access to that disclosure and the minister was unaware of it.

McDonald said FMA chairman, Mark Todd and the board should have access to Everett’s disclosure.

McDonald said, “In my view, disclosure of chief executive conflicts of interest should always be made to the entity’s chair and to the board.”

“As chief executive, Mr Everett did not have a manager to whom he was required to disclose his conflict of interest in the terms expressed in this Conflicts of Interest policy. The policy should have expressly required the chief executive to make disclosure to the chair, and for a plan on how to manage the conflict to be agreed with the chair, with that information then to be provided to the board.”

The FMA, in a press release, acknowledged the report with new chief executive Samantha Barrass saying the regulator accepted the findings of the report and would make the recommended changes.

“As the primary conduct regulator of the financial sector, the FMA’s integrity must be beyond reproach,” she said. “We set high standards for ourselves and are implementing all the recommendations.”

Its response, which appears to be to have been emailed to fewer journalists than usual, highlights there was no damage done:

  • The FMA Chief Executive at the time, Rob Everett, had proactively disclosed a conflict of interest with one of the providers and, as a result, took no part in the process.
  • The conflict of interest did not have any impact on the advice the FMA provided to the Minister regarding the appointment of default KiwiSaver providers.
  • The FMA’s role in the process was limited to advising on whether there were any regulatory compliance issues that may affect the ability of the proposed KiwiSaver fund managers to act as default providers.

Tags: conduct Rob Everett Samantha Barrass

« FMA puts finishing touches on draft conduct guidelinesAMP Capital to disappear this week »

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Comments from our readers

On 18 March 2022 at 10:48 pm I was wondering said:
Blah blah blah
Caught with his hand in the cookie jar. Business as usual in the Welly beltway. A huge response to his that ‘Rob’ is included by outside or inside parties, I feel so safe now. Typical Mandarin. I thought they didn’t monitor our humble responses?
Business as usual, nothing to see here
On 18 March 2022 at 10:56 pm I was wondering said:
Oops for new CEO! Should have checked on this. Not a good start. Let’s wait for much more legislation to provide solutions for problems that don’ exist.
Lot's more to come
On 21 March 2022 at 9:59 am Elephant1 said:
Did the Governor of The Rerve Bankk disclose that he had been CEO of NZ Super Fund , when they took a major shareholding in Fidelity Life.? And a few months later, he headed a review of the Life Insurance Industry.
On 25 March 2022 at 12:01 pm Rachelle Bland said:
So if the FMA's involvement was limited to "advising on whether there were any regulatory compliance issues that may affect the ability of proposed KiwiSaver managers to act as default providers", why then did they allow Simplicity to be appointed, when they considered that their 'All Greys' advertising campaign which ran from August to October 2021 made statements that were "unsubstantiated and likely to mislead or deceive under the Financial Markets Conduct Act 2013 (FMC Act)". The default provider appointments contracts came into force until December 2021 so they should have recommended to the minister that Simplicity's default contract be cancelled.

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