Setting the agenda: FMA’s Financial Conduct Report 2025/26

On 25 June 2025, the Financial Markets Authority – Te Mana Tātai Hokohoko (FMA) released its inaugural Financial Conduct Report (FCR). FMA chief executive Samantha Barrass has described the FCR as the “conduct-regulation counterpart to the Reserve Bank’s Financial Stability Report”, designed to provide clarity to the financial sector on what to expect from the FMA by outlining key conduct risks and opportunities on the FMA’s radar over the next 12 months. The FCR also underpins the FMA’s recent approach to outcomes-focused regulation, and is now a formal performance measure in its 2024/25 Statement of Performance Expectations.

The FCR sets out key areas of focus for the 2025/26 year across five sectors that the FMA regulates – financial advice, banks and non-bank deposit takers, insurers, capital markets and investment management – as well as a group of cross-sector priorities that apply universally, which we have summarised below. Each of the actions we have summarised below are actions that the FMA intends to undertake over the 2025/26 year, which begins on 1 July 2025. Boards, executives, and leaders should review the FCR to better understand the FMA’s current regulatory priorities as they relate to their business.

 

CROSS-SECTOR

These priorities are relevant for all sectors and should be considered by all businesses alongside their sector-specific priorities.

• Removing unnecessary regulatory burden: continuing the pilot regulatory sandbox initiative, progressing towards a single conduct licence by streamlining licensing application processes under the Financial Markets Conduct Act 2013, and collaborating with the Reserve Bank of New Zealand (RBNZ) to ensure the delivery of the twin peaks regulatory regime, whereby regulation is split into two broad functions – conduct regulation (governed by the FMA) and prudential regulation (governed by the RBNZ).
• Understanding emerging risks and opportunities: building understanding of emerging risks and opportunities relating to valuation practices for private markets in New Zealand, exploring how a more active role can be taken relating to companies providing virtual assets services in New Zealand, and deepening understanding of operational resilience practices for certain sector groups (including Discretionary Investment Management Service (DIMS) providers, Peer-to-Peer Lending, Crowdfunding and Insurance providers).
• Ensuring customers are treated fairly when things go wrong: improving consumer awareness of how to complain, examining the information that firms provide consumers about the availability of dispute resolution services, and assessing whether existing processes for dispute resolution make it easy for consumers to raise concerns and have them addressed effectively.
• Disrupting scam activity: developing a pilot partnership with banking and technology sectors to enable faster information sharing, tackle emerging scams and remove scam content.
• Advocating for reform for assets held in custody: continuing to engage with the Ministry of Business, Innovation, and Employment (MBIE) on options for law reform to improve protections for assets held in custody and enhancing visibility of the custodial sector.

 

FINANCIAL ADVICE

These priorities are relevant to those businesses providing financial advice on financial products, insurance, residential mortgage lending and financial planning.

• Conduct impacting consumers in vulnerable circumstances: the FMA intends to triage complaints from product providers to prioritise investigation of adviser conduct that adversely impacts vulnerable individuals by exposing them to unsuitable products and/or unnecessary costs.
• Consumers and investors understand fees, incentives, and commissions: ensuring Financial Advice Providers (FAPs) are disclosing appropriate information to enable informed decision-making, reviewing disclosure provided by financial advisers as part of the FMA’s monitoring of FAPs, and conducting a thematic review to increase the FMA understanding of FAP business models and remuneration structures.
• Effective protection of client assets: monitoring the arrangements FAPs have in place to oversee the outsourcing of client money or property handling to a custodian, reviewing the governance and supervision of services provided, and ensuring appropriate protections are in place.
• Challenges and opportunities to improve accessibility of advice: understanding the challenges and opportunities for improving access to advice by undertaking a review to consider consumer preferences and demographics, innovation and digital advice, remuneration structures, advice business models, and the ease of provision of regulated financial advice.

 

BANKS AND NON-BANK DEPOSIT TAKERS

Banks and non-bank deposit takers are expected to reflect on the recent Conduct of Financial Institutions (CoFI) regime and the FMA’s Fair Conduct Programme (FCP) insights report alongside the FMA’s below priorities to better understand the FMA’s expectations of this sector.

• Proactive product reviews for existing products: ensuring firms proactively review existing products and services to confirm they align with consumers’ requirements and objectives, publishing data on savings and lending product interest rates to improve transparency, and helping consumers better understand bank responses to Official Cash Rate changes and make informed decisions about products meeting their needs.

 

INSURERS

Similar to the above, insurers are expected to reflect on the recent Conduct of Financial Institutions (CoFI) regime and the FMA’s FCP insights report alongside the FMA’s below priorities to better understand the FMA’s expectations in this sector.

• Proactive product reviews for existing products: ensuring insurance companies proactively review existing products and services to confirm they align with consumers’ requirements and objectives, and that staff understand the suite of products within the business, considering legacy products and the learnings from fair dealing proceedings taken against insurers by the FMA.
• Communication with consumers on product and service offerings: engaging with providers to understand how the FMA can support the successful implementation of the Contracts of Insurance Act 2024, and whether further FMA guidance or insights would support improvements in communication practices during all parts of the insurance life cycle.

 

CAPITAL MARKETS

These priorities are designed to facilitate fair, efficient and transparent capital markets that enhance investor confidence and participation and incentivise better corporate governance and accountability.

• Tackling misleading disclosure by wholesale issuers: ensuring disclosure by wholesale offerors, including advertising, is not false, misleading, or unsubstantiated, and considering the FMA’s “full range” of regulatory tools to respond as necessary in breach situations.
• Clear expectations for ethical investment disclosures: publishing refreshed guidance to help issuers consider how they present their products in disclosures and advertising and enable investors to understand ethical claims, taking action where disclosures or claims are made that are materially misleading, deceptive, or unsubstantiated and where expectations for ethical disclosure are already clear.
• Insider conduct and continuous disclosure: continuing to work closely with NZ RegCo (the regulatory arm of the NZX) to detect and act against market misconduct, using the FMA’s range of regulatory tools to respond to misconduct when it occurs, and support appropriate conduct through engagements with participants.
• Supporting policy changes for capital markets settings: continuing to support MBIE to advance capital markets policy changes, including the package of work to make disclosure of prospective financial information for equity IPOs, considering issues and options related to more explicitly facilitating KiwiSaver providers investing in private assets, considering adjustments to the climate-related disclosures regime, and reviewing certain product disclosure requirements, liability for auditors, and continuous disclosure liability.
  

 

INVESTMENT MANAGEMENT

These priorities are relevant for entities that provide investment vehicles or services to enable investors to seek returns on capital.

• Clear expectations for ethical investment disclosures: publishing refreshed guidance to help issuers consider how they present their products in disclosures and advertising and enable investors to understand ethical claims, taking action where disclosures or claims are made that are materially misleading, deceptive, or unsubstantiated and expectations for ethical disclosure are already clear.
• Consumers and investors understand fees, incentives, and commissions: for Managed Investment Schemes (MIS), ensuring fees, incentives and commissions are well understood through sector engagement. For DIMS providers, looking for evidence that customers are receiving clear and consistent reporting about fees, rebates and commissions.
• Effective protection of client assets: assessing how Supervisors have responded to the findings of the FMA’s 2019 thematic review of MIS custody arrangements, monitoring the arrangements DIMS providers have in place to oversee the outsourcing of client money or property handling to custodians, and assessing how robust the processes are where providers and/or advisers hold client funds themselves.
• Ensuring consumers’ and investors’ interests are at the forefront of decision-making: engaging with Supervisors to understand the findings of their liquidity risk management (LRM) monitoring activities and whether further clarity or insights from the FMA could support improvements.

 

OUR VIEW

The FMA has provided succinct key takeaways for boards, CEOs, and senior executives to consider against the regulatory expectations that the FCR sets out for each sector. We encourage boards, executives, and leaders to use the FCR to better understand the FMA’s regulatory priorities as appropriate to their business. There is an expectation that these takeaways will be used to evaluate how the FCR priorities can enhance business practices and help achieve better outcomes for consumers and markets.

Despite being sector-specific, some clear themes appear to run through multiple sectors as being of heightened importance to the FMA:

• Proactive product review for existing products: risks remain from reliance on legacy product and technology systems and manual controls and processes, as well as inadequate staff training. There are opportunities for relevant sectors to learn from observed good practices in areas such as identifying consumer objectives and target markets and managing the risks of potential harm before they occur through tailored systems and controls.
• Effective protection of client assets: in 2024, the FMA published new guidance to help participants to understand their obligations when providing client money and property services. Instances where weaknesses in custody have contributed to fraud or business failure – resulting in investor losses – have been observed, as well risks around the independence of some custody arrangements and inconsistent custodial processes, which the FMA wishes to target. The FMA highlighted the fundamental importance of safekeeping client assets, noting New Zealand’s “weak” regime for custody. The FMA is engaging with MBIE on custody regulation, and we expect developments in this area over the next 12 months.
• Understanding of fees, incentives, and commissions: clients need to receive appropriate information around the costs and nature of products and advice, so they can make informed decisions about the products and services they choose.
• Clear expectations for ethical investment disclosures: remaining mindful of disclosure obligations is especially important in the current environment. There is a risk that confusing, unclear, and inconsistent disclosure and advertising for ethical investment leads to uninformed investor decision making and damages trust and confidence in ethical products.
• Liquidity risk management and related party transactions: the FMA is focused on reviewing settings to strengthen public markets and address vulnerabilities in private markets. The FMA specifically calls out LRM – including MIS managers’ being “overly optimistic” about their LRM capabilities – and controls for related party transactions not being “applied effectively”. We expect greater engagement from the FMA on MIS managers’ LRM and related party transaction practices over 2025/26.

The FCR is expected to 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 further updates from the FMA.