FMA stakeholders often critical – survey

The Financial Markets Authority (FMA) has indicated it still has some way to go to win overwhelming support from the sector it oversees.

This admission came in its latest annual report, til June 2022, as a result of a survey of 162 stakeholders.

This survey found indications that many of the professionals that it supervises did not think it was doing a very good job.

For example, only 41% of customers and investors thought the FMA’s actions helped promote fair, efficient and transparent financial markets. That was down from 48% a year earlier.

And stripping away the FMA's involvement, the same survey showed 70% of investors and customers were confident that New Zealand financial markets and financial service providers treated investors and customers fairly, up from 65% a year earlier.

Taken together, those two figures indicated that many investors thought that financial markets were doing quite well but the FMA was not helping very much.

A related question carried a similar message: 62% of the survey sample found it easy to do business with the FMA, compared with 74% in 2021.

“These results indicate that while New Zealanders are generally confident that they will be treated fairly by the financial services system, we have work to do to bring perceptions of FMA actions up the same level,” the authority wrote in its own report.

But the survey did not have exclusively bad news for the FMA. In some respects, it improved: 91% thought the FMA supported market integrity, compared with 88% in 2021.

And the same number, 88%, agreed the FMA helped to raise the standards of market conduct, consistent with the figure a year earlier. And 79% said dealing with the FMA was good or excellent.

These responses came in a busy year for authority, which was affected by Covid restrictions. The report shows the FMA initiated a range of court proceedings against companies and individuals, including Kiwibank and Simplicity, for misleading statements.

Its work focused on four main areas: monitoring and oversight of financial market participants; preparations for new financial markets legislation; building investor capability; and enforcement of legal obligations in the finance sector.

Broken down further, the FMA focused on topics such as derivatives, cyber-resilience, insurers’ conduct and culture, and the actions of fund managers.

During the year, it began preparing implementation of the Financial Markets (Conduct of Institutions) Amendment Bill (CoFI), which was passed into law in June 2022, and needed preparatory work to be commenced. The FMA also worked with other agencies on standards for forthcoming climate-related disclosure requirements,

Elsewhere in the report, the FMA indicated worries about New Zealand's resilience to cyber crime.

“We have developed concerns about shortcomings in the cyber resilience and operational systems among entities we regulate, including underinvestment in technology and the use of unsupported or legacy systems,” the FMA wrote.

“The financial services sector is a popular target for cyber criminals, recording the highest number of reported incidents across all industries in New Zealand for the quarter ended March 2022.”

In another part of the report, banks got a tick of approval from the FMA. It said they had improved a lot after negative reviews in 2018 and 2019 in partnership with the RBNZ.

“Most banks and some life insurers have completed their action plans and are now focused on embedding these practices into their business,” the FMA wrote.

“There is now more consistency in identifying and fixing issues or remediating customers promptly, but with room for improvement.”

One of the FMA's roles is to combat fraud, which it does in concert with many state agencies such as the police and the Commerce Commission. It reported a big spike in investment scams: 105 compared with 89 a year earlier. And 48 involved unregistered businesses, compared with 24 a year earlier.

Commenting on the report, the chief executive Samantha Barrass said consumers were looking for greater accessibility, for seamless digital experiences and for support in a difficult economic environment.

“Against this backdrop, it will be important to have a clear focus on the outcomes we are looking to see achieved. In particular, to support more New Zealanders than ever having confidence that the financial sector is working well for them,” she said.

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