FMA publishes its Annual Corporate Plan 2022 / 2023

The Financial Markets Authority (FMA) has released its Annual Corporate Plan 2022 / 23 (ACP). The ACP sets out the FMA's key priorities and focus areas for the current financial year. This is the first ACP under the leadership of FMA Chief Executive Samantha Barrass. The FMA focusses on three key areas in the ACP:

1. Maintaining a steady and consistent focus on building conduct maturity in the sectors the FMA already licenses and oversees.
2. Delivering core functions relating to licensing, monitoring, and responding to egregious misconduct — particularly in relation to consumer harm.
3. Building capability to implement new legislation and taking on increased responsibilities under its expanding mandate as a conduct regulator.

The ACP makes specific reference to the three new legislative regimes which expand the FMA's remit:

1. Financial advice regime (FSLAA) — full licensing takes effect from March 2023.
2. Climate-related Disclosures (CRD) — developing standards and consultation through 2023, with the first climate-related statements due in 2024. You can find out more information about CRD in our previous updates (here, here and here).
3. Conduct of Financial Institutions (CoFI) — conduct licensing opens in 2023, with fair conduct programmes and obligations in effect from 2025. You can find our previous updates on CoFI (here and here).

Application to fund managers

While much of the content of the ACP relates to the FMA’s regulatory functions and activities which have been previously announced, there are several new actions mentioned which will apply to Managed Investment Scheme (MIS) Managers. These are:

• Developing a new Conduct Framework, which will underpin the FMA's significant transition to becoming an outcomes-focussed regulator and inform the FMA's conduct guide expected later this year.
• Updating performance fees guidance, including benchmark expectations.
• Publishing guidance on liquidity risk management for managed funds.
• Consulting on a new Financial Markets Conduct Act standard condition relating to cyber security and operational resilience.

In relation to FMA's regulatory activities as already announced, the ACP describes the FMA’s role as follows:

• Supporting Supervisors and MIS Managers as they produce their first value for money reviews. You can find our previous update on value for money obligations here.
• Progressing a joint thematic review on governance with the Reserve Bank of New Zealand, focussed on boards of regulated entities and their ability to effectively govern and provide oversight.
• Continuing a thematic review on the use of the wholesale classification and regulation of property syndicates.
• Publishing findings and engaging with industry on a sector risk assessment of MIS Managers and later Discretionary Investment Management Service (DIMS) Managers.
• Undertaking consumer research, focused on understanding their perceptions and behaviours in relation to financial products and services.
• Undertaking planned monitoring of licensed entities.
• Responding promptly to egregious misconduct, particularly in relation to fair dealing breaches by banks and insurers, and the advertising of financial products.
• Continuing to engage with industry, including through its Stakeholder Relationship Management programme, roadshows, workshops, seminars and forums, and briefings.

Our view

The FMA's approach to its role as New Zealand's conduct regulator of financial markets is evolving significantly. The ACP is further confirmation of the FMA's transition to focussing on consumer outcomes and using its enforcement powers against misconduct. This is consistent with the FMA's industry engagement to date. We hope that the incoming Conduct Framework provides further guidance on what those regulated by the FMA can expect as the FMA goes through this transitional period.

The ACP also highlights the FMA's incoming Strategic Change Programme (SCP). The SCP seeks to ensure the FMA is well positioned to oversee its broadening responsibilities and to lift its capabilities over the medium term. The SCP is likely to include an organisational restructure and expansion to help the FMA approach its developing role as an outcomes-focussed regulator.

If you have any questions, please do not hesitate to get in touch.

*Lola Stoodley and Boston Flanagan-Connors also contributed towards the authoring of this article.