Regulatory Roadmap: FMA’s Financial Conduct Report 2026/27

On 30 June 2026, the Financial Markets Authority – Te Mana Tātai Hokohoko (FMA) released its second annual Financial Conduct Report (FCR). FMA chief executive Samantha Barrass described the FCR as reflecting “both the progress made and the key challenges and opportunities ahead”.

The FCR sets out the FMA’s regulatory priorities for the 2026/27 financial year, covering specific sector focus areas and cross-sector themes. It reflects the FMA’s shift towards a more sector-focused supervisory model, with four themes running across multiple sectors: managing conflicts from remuneration structures; product design for new and redesigned products; complaints; and fraud detection and prevention.

The FCR includes priorities across six sectors regulated by the FMA. Notably, the 2026/27 FCR includes priorities for the consumer credit sector, reflecting the transfer of credit regulation to the FMA from 1 July 2026.

We summarise the key takeaways below.

 

KEY CROSS-SECTOR THEMES

Managing conflicts from remuneration structures

The FMA’s priority is targeted monitoring of remuneration structures and agreements, with intervention where these lead to consumer harm. The broader objective is to align incentives with the quality and suitability of products and services. The FMA is concerned that commission-based remuneration can distort behaviour and drive poor consumer outcomes.

For financial advice businesses, the focus is on ensuring robust processes, controls and disclosure to manage conflicts arising from upfront and ongoing commissions. These have been linked to mis-selling, unsuitable advice and product replacement driven by incentives rather than client interests.

Consumer credit providers face similar risks where lenders rely on intermediaries, with commissions potentially incentivising harmful sales practices, such as high fees, high interest rates or unaffordable lending.

Product design for new and redesigned products

The FMA is focused on ensuring products are designed around consumer needs and can be reliably delivered in practice, not just in theory. While firms generally review products, gaps remain, particularly reliance on the absence of complaints as evidence of fair outcomes, inconsistent communication of product changes, and weaknesses arising from legacy systems and manual processes. These issues can result in products failing to perform as intended or not meeting consumer expectations over time.

The priority is ensuring firms take a full lifecycle approach to product design, considering consumer needs, system capability and distribution, while strengthening governance and technology to ensure products are reliable and understandable. This supports the FMA’s longer-term objective that products continue to meet consumer needs at all stages of the product lifecycle and are delivered as promised.

Complaints

Across five of the six FMA-regulated sectors, the FMA sees complaints as a critical but underutilised source of insight for improving products and services. Although most firms have complaints frameworks, weaknesses include inconsistent identification and recording of complaints, limited reporting to senior management, and failure to analyse trends to inform improvements.

For consumer credit providers, there is an added concern that consumers may not know how to complain or obtain effective resolution, meaning harm can go unaddressed. The FMA’s priority is to ensure complaints are easy to raise, fairly resolved and actively analysed, with lessons embedded into business practices to drive systemic improvements and better consumer outcomes.

Fraud detection and prevention

Fraud remains a significant cross-sector risk, particularly mortgage fraud, insurance fraud and misuse of KiwiSaver first-home withdrawals. These can cause severe financial harm, including unmanageable debt, denied claims or loss of savings.

The FMA is focused on strengthening banks’ and non-bank deposit takers’ controls to better detect and respond to mortgage fraud, including through the use of fraud “red flags” and improved systems. It is also assessing how effectively firms remediate consumers affected by fraud.

 

OTHER THEMES ARISING FROM THE FCR

• Custody framework and MIS fund administration under review: the FMA is progressing work to recommend changes to strengthen New Zealand’s custody regime, recognising that current protections lag international standards. There is also a specific focus on assessing the resilience of outsourced managed investment scheme (MIS) fund administrators, given their critical and concentrated role in the market.
  
  
• Disclosure of wholesale offers: targeting misleading or unsubstantiated advertising of wholesale offers is a key focus for the FMA, particularly where this reaches less sophisticated investors. The FMA’s focus is on supporting informed decision-making and protecting market integrity by strengthening firms’ processes, controls and reporting mechanisms.

• Insider conduct: the FMA continues to prioritise insider conduct by directors and senior managers, focusing on identifying and investigating the most serious cases through close coordination with NZX’s frontline regulator, NZ RegCo. While most issuers have appropriate policies in place, the FMA has observed repeated and sometimes systemic issues, reinforcing expectations that firms actively monitor compliance and manage access to material non-public information.
  
  
• Digitisation opportunities in financial advice: supporting digitisation in financial advice, including artificial intelligence (AI), is a focus for the FMA, which will undertake a thematic review of the use of AI in financial advice. The work will examine how AI is used in practice, the conduct risks it creates, and the safeguards firms have in place. There is a clear signal that firms have been overly cautious to date and should have greater confidence in adopting innovation where governance and consumer protections are appropriately managed.

 

UPDATE ON 2025/26 PRIORITIES

The FCR also provides an update on the FMA’s regulatory work over the past year, highlighting key areas of progress against the 2025/26 Financial Conduct Report. Our insights on that report can be found here.

These areas included:

• Effective protection of client assets held for financial advice providers: the FMA monitored how financial advice providers oversee outsourced custody and manage client assets. It identified generally sound practices, but also gaps in understanding custody obligations and oversight arrangements. Read our insights on the FMA’s ongoing review of New Zealand’s custody framework here.
  
  
• Communication with consumers: a key focus was improving insurers’ communication with consumers on product and service offerings, particularly disclosures around product exclusions, fees and premiums. This work is closely linked to the incoming Contracts of Insurance Act 2024, with the FMA reinforcing the need for firms to be well prepared and to prioritise clarity well ahead of implementation.
  
  
• Clear expectations for ethical investment disclosures: the FMA progressed guidance on ethical investing disclosures, issuing final sustainability-related disclosure guidance in May 2026. The guidance is intended to improve consistency and clarity in how product features are described, supporting more transparent disclosures and better-informed investor decision-making. You can read our summary of the guidance here.

 

OUR VIEW

The FCR has clear relevance across the six sectors regulated by the FMA. The FMA has posed key questions to boards, CEOs and senior executives that are practical and should be actively used to test how well current practices align with expectations and drive better outcomes.

We see value in the annual FCR as a clear statement of regulatory direction from the FMA. This year’s report reinforces a system-wide uplift, with a sharper focus on areas such as custody and asset protection. The FCR has become an annual reference point for the FMA, stakeholders and media to understand the FMA’s approach for the year ahead and what it aims to achieve.

DLA Piper will continue to monitor developments across each sector and report on further FMA updates.