|        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Friday, April 12th, 6:36PM


Latest Headlines

BusinessNZ says FMA should shelve its fair outcomes guidelines

Business organisations and lawyers are panning the Financial Markets Authority's plan to focus its regulatory efforts on fair outcomes for consumers, with BusinessNZ calling for guidelines to be shelved altogether.

Friday, March 15th 2024, 1:02PM 4 Comments

by Jenny Ruth

The FMA's guidelines will have unintended consequences, “will create confusion” with existing financial markets regulations and, in particular, with the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFi)  which is due to come fullying into force from March 31, BusinessNZ says in its submission on the consultation document FMA published in November.

“We note the proposed fair outcomes would represent a new concept, something that is neither legislation or regulation, nor guidance for applying such a regulatory requirement,” the organisation said.

BusinessNZ is concerned the guidelines “would create a completely separate rulebook” and add to the complexity of the legislative landscape.

The guidelines should not proceed “until issues including duplication and compliance costs have been resolved through further consultation.”

The NZ Banking Association, which represents 18 registered banks, slammed the guidelines as being inconsistent with existing legislation, lacking in clarity of purpose, introduce the risk of hindsight bias and in providing examples of outcomes, create unintended prescription.

“The guide risks  increasing uncertainty” and confusion, and could undermine the principles-based approach of CoFi, the NZBA said.

It pointed to the new government's stated aim of reducing the volume and duplication of regulations.

Cygnus Law noted that the definition of the word “fair” “is inherently unclear as different people will interpret fairness differently.”

“There is no reason to think that what an FSP [financial services provider] thinks is 'fair' with respect to prices will be shared by consumers,” the law firm said.

“In fact, there's almost always likely to be a divergence of view and markets operate to develop a degree on consensus.”

Cygnus said it doesn't agree that fair outcomes “are an appropriate tool in some areas to guide FMA's approach to its role.

“In our view, the guide is seeking to impose the fair outcomes as de facto legal standards. We don't consider that is permitted by law.”

It suggests rewriting the guide “to make it clear that the fair outcomes are aspirational goals and not mandatory requirements.”

Another law firm, Chapman Tripp, says the draft guidelines would impose “significant additional compliance burdens, confusion and uncertainty  … without clear legislative authority.”

Chapman Tripp also warned that some of the rationale within the guide for taking regulatory intervention “could increase the risk of successful judicial review against FMA's decision making.”

Because the regulatory expectations in the guide aren't always supported by requirements in relevant legislation, this could undermine confidence in the FMA as an effective enforcement body, it said.

“Without an underpinning statutory base, some of the draft guide lacks the authority of parliament and risks being unenforceable or amenable to judicial review for being contrary to the constitutional principle of the separation of powers,” Chapman Tripp said.

“Only parliament can determine the law and where parliament devolves power to the executive arms of government under a delegated authority, there are limits on the exercise of power which are enforced by the courts.”

Tags: FMA

« Analysing AI’s Impact on Financial Advice, Part 2Investment manager cleared of assault »

Special Offers

Comments from our readers

On 17 March 2024 at 10:18 am w k said:
that's right, "fair outcome" has to go - there's no clear definition.

the main focus should be providing sufficient unbiased and accurate information for the client/prospect to make a decision, and the professional conduct of advisers.

if the adviser couldn't make his/her presentation clear enough for the prospect to understand or not helpful, the prospect can walk away and look for another adviser, simple as that.

some clients are happy with 3-steps, while others may require more than 7/8 steps. so why, only 6-steps? every client and prospect are different and don't have the same expectation. hence, they have to be approached accordingly.
On 17 March 2024 at 1:15 pm KeepThingsSimple said:
NZ is a geographically isolated country with a tiny population. This makes it vulnerable to oligopolies: large scale advantages are available through consolidation and there are shallower value pools to induce new market entrants.

It seems that successive governments seem to be concerned about the concentration of market power in a bunch of sectors - airlines, banking, supermarkets, general insurance, petrol stations, etc. Whether companies in these sectors actually have market power is a separate discussion, but it seems odd that in this context, policy settings seem to be pulling in opposite directions.

We need to be thoughtful about imposing rising compliance costs onto industry, as this invariably lessens competition. Of course, some regulation is needed but the default setting of importing “best practice” regulation from large overseas markets that can more easily absorb compliance costs must change.
On 18 March 2024 at 9:55 am Amused said:
@ w k - well said.
@ KeepThingsSimple – excellent point made about the impact of adopting “best practice” regulation from overseas.

These new proposed guidelines from the FMA regarding fair outcomes for consumers are just the kind of thing that the new Ministry of Regulation has been charged with eliminating. Wellington bureaucrats who continue to try and add unnecessary duplication and complexity to existing regulation may very well find themselves without a job under this new Government.

Whether it’s a financial adviser providing advice to a client seeking loss of income cover or a self-employed sign writer seeking to erect a sign on an office building the amount of red tape required to accomplish both tasks now is stifling, both to the service provider and the consumer themselves. Overregulation has now hogtied many industries within New Zealand.

This new Government seems to understand that the purpose of regulation is to benefit the consumer, not the regulators themselves.

On 18 March 2024 at 12:23 pm Backstage said:
From the start this appeared flawed and confusing. What was the recent exercise we have just travelled through meant to have assisted with, better client outcomes!

The project appeared to be a solution looking for a problem. With any problem solving wouldn't we start by clearly defining the problem? What is the problem they are trying to solve.

Once this has been clearly identified then a targeted approach could be helpful.

Embarking on some hugely broad journey to appear relevant and then to end up probably slapping rules on top of rules on top of rules... actually sounds like the purpose of a Government Department when I put it that way :). Seriously however, what is the problem that is trying to be solved? Is it using up allocated budget for projects to assist keeping people employed?

@WK, couldn't agree anymore on your 3-7 step or more process. A problem the FMA could help me and my clients solve right now is document fatigue! It almost becomes a credibility destroyer as having to constantly explain the introduction of document after document makes the engagement with insurance solutions feel like the purchase of a small country.

Sign In to add your comment



Printable version  


Email to a friend
News Bites
Latest Comments
Subscribe Now

Weekly Wrap

Previous News
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.24 ▼6.75 6.65
ANZ 8.64 7.84 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.24 6.79 6.65
ASB Bank 8.64 7.24 ▼6.75 6.65
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.24 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.84 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 7.04 - -
Co-operative Bank - Owner Occ 8.40 7.24 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.74 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.69 6.45 6.19
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.75 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 8.25 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 7.25 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.84 7.45 7.25
SBS Bank Special - 7.24 6.85 6.65
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.74 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 8.04 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 7.24 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - - 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.29 7.32 6.65

Last updated: 8 April 2024 9:21am

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
Site by Web Developer and