The New Zealand Financial Markets Authority (FMA) has released its Conduct Outcomes Report 2016 (Report), highlighting the key issues and actions from the FMA's enforcement, supervision and preventative activities for the financial year July 2015 to June 2016 (Reporting Period).
Consistent with its recently released guide to the FMA's view of conduct, and the Strategic Risk Outlook 2017, FMA set out its approach to enforcement as follows:
- Enforcing the law: FMA functions as both a law enforcement agency and a conduct regulator. It responds to market misconduct and the risk of harm to investors from poor systems and governance.
- Risk-based approach: FMA takes a risk-based approach to its regulatory activities. It assesses the financial services providers and the types of conduct that are most likely to pose the most serious risks to fair, efficient and transparent markets, then directs its attention and efforts accordingly.
- Range of responses: FMA can take court action, as well as a number of other responses. Court action would be pursued only if it would serve as the best deterrent and the most appropriate type of sanction for misconduct, obtaining compensation for victims, or clarifying the law. The FMA's actions are reviewed by senior management and external advisers – a process which is rigorously tested by the FMA's board.
- Working with others: FMA often works with frontline regulators, such as supervisors, auditors and NZX, although FMA still has a statutory responsibility to oversee their regulatory work and an obligation to report on this oversight annually.
The Report outlines a number of key actions taken by FMA during the Reporting Period, including:
- the issuing of civil proceedings against Mark Warminger for market manipulation;
- the issuing of administrative orders to Cambrian Corporation Limited to change its market materials which were considered to contain misleading and unsubstantiated statements;
- issuing a bevy of public warnings regarding businesses operating outside the FMA's regulatory perimeter;
- taking action where it saw non-compliance with financial reporting obligations, including civil proceedings for alleged breaches of substantial shareholder disclosure obligations;
- issuing a formal warning under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 to Craigs Investment Partners Limited; and
- obtaining guilty pleas from four Australian-based directors charged with criminal offences under the Securities Act 1978 for making untrue statements.
Specific areas of focus in 2017 and beyond are:
- Conduct in wholesale markets.
- Monitoring the FMA's regulatory perimeter.
- Improving investor capability and education.
- Following up on conditions imposed during licensing.
- Sales practices and conflicted conduct.
For more details on these areas, see our recently published update on the FMA's Strategic Risk Outlook.
If you have any questions, or require further information on how the Report affects you or your business, please contact one of our experts.