Financial Markets Authority Focus for 2013

28 Feb 13

The Financial Markets Authority (FMA) has today released a Compliance Focus 2013 document outlining the FMA’s priority areas for monitoring and surveillance throughout this year.

The FMA’s focus covers four major themes:

• Building customer trust – with market participants (issuers, brokers, fund managers, trustees etc.) needing to be fair and transparent with their customers and having customers interests at their core;

• Raising standards in existing regimes – with a requirement for participants to demonstrate behaviour above the bare minimum required, with a focus on good conduct, ethics and integrity;

• Embedding new regimes – participants adapting to new regulatory regimes (including the new anti-money laundering regime) so as to realise the intended benefit for markets and customers;

• Kiwisaver – focussing on participants involved in management, distribution and oversight of Kiwisaver products ensuring they meet the regulatory standards and act with customer interests in mind.

Issuers take note
Points of particular note for issuers broadly come under the focus of raising standards in existing regimes.

The FMA has signalled specific monitoring of issuer and director disclosures of conflicts of interest and business changes. The FMA will be looking at that area in disclosures documents (including prospectuses and investments statements) and particularly taking an interest where businesses are known to be experiencing trading or financial difficulties.

The FMA has also said that this year it will be monitoring issuers’ compliance with the guidance released by the FMA last year on effective disclosure by issuers.

Christchurch – a watching brief
The FMA states that it is mindful of the need to support participants and investors throughout the rebuild of Christchurch, noting the unique Christchurch environment in which insurance and other compensation monies will be available for reinvestment.

Along with opportunities the FMA notes the challenges and risks associated with Christchurch, particularly where there is poor conduct, or regulatory standards are not maintained. We take from these comments that while monitoring of the investment and financial activities associated with the Christchurch rebuild is not a separate focus of the FMA, that certainly the FMA will be keeping a watching brief on these activities in Christchurch with the expectation that poor conduct on the part of investment or financial participants in that market will be acted upon. We endorse that approach because ensuring that economic investment and confidence in the rebuild is not undermined is vital.

The FMA also notes the apparent attractiveness of property related investments in the current economic climate, and that the FMA will be considering the transparency of property investment risk and structures, as well as issuing guidance for property proportionate ownership schemes. The FMA is also to monitor compliance of such schemes following the expiry of relevant exemption notices (notably the Securities Act exemption relating to proportionate ownership schemes). This is highly relevant for the Christchurch rebuild, where collaborative investment, such as property syndications, will be a key focus. The message here is to get your risk disclosures and collaborative investment structures right – the regulator will be watching.

Prepared by Ben Johnston.