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Better conduct, better customer outcomes

Liam Mason, Director of Regulation


November has been a busy month for the FMA. At the start of the month we published the joint RBNZ/FMA culture and conduct review into New Zealand’s banks. This was the first time the FMA and RBNZ have worked together on a project of this size.


While the review did not find widespread conduct and culture issues in New Zealand’s banks, it found vulnerabilities in the governance, management and identification of conduct risks by all banks.  It also found a small number of issues relating to poor conduct by staff. Issues around system weaknesses were far more commonplace.  The review found that banks need to improve their focus on the customer outcomes they produce and on how bank culture affects those outcomes.

The conduct and culture review set out that both the RBNZ and the FMA expect banks to revise their sales incentives. Removing incentives linked to sales measures is a significant step towards this goal. All banks will have to set out how they will meet our expectations by March 2019. Some of the reasons behind this expectation were set out in our Bank Incentive Structures report, published today.


Our culture and conduct review of life insurers remains ongoing. While we aim to have all work completed on this report by the end of the year, we now plan to release the report at the end of January, rather than publishing the findings just before Christmas.


On another note, we welcome the move by a number of life insurers in recent weeks to end offshore conferences as part of the soft commissions they offer advisers. We set out our concerns about soft commissions and the potential conflicts of interest they pose in a report published earlier this year.


Liam Mason

Director of Regulation, FMA

Open consultation

Submissions to a targeted consultation on our proposal to remove the expiry dates for all FMCA licences are due by 23 November 2018. Currently, we grant market services licences under the Financial Markets Conduct Act 2013 (FMCA) for a five-year term. Please email for more information.

Annual Report

Last month, we published our Annual report for the financial year ending June 30 2018. The report highlights a number of key activities that took place in the year, including:

  • A series of reports on conflicted conduct in the insurance industry. 
  • For the first time, all KiwiSaver providers were required to tell each member exactly how much they have paid in fees in a dollar amount. This was supported by investor capability campaigns targeting younger KiwiSaver members.
  • Work on the quality of corporate governance and disclosure.
  • The readiness of both organisations and individuals who give financial advice for the planned changes to the regulation of financial advice.
  • 250 supervision monitoring engagements with providers.

The period covered also saw the FMA in court on a wide range of matters. 


Conduct and Culture review

Together with the Reserve Bank of New Zealand, we published our joint review into the conduct and culture of 11 New Zealand banks. The review is the first of its kind in New Zealand. We identified significant weaknesses in the governance and management of conduct risks and concluded that the overall standard of banks’ approaches to identifying, managing and dealing with conduct risk needs to improve markedly.

Some of the areas that were identified for improvement included:

  • Greater board ownership and accountability – including properly measuring and reporting on conduct and culture risks and issues
  • Prioritising the identification of issues and accelerating remediation
  • Prioritising investment in systems and frameworks to strengthen processes and controls
  • Strengthening staff reporting channels, including whistle-blower processes for conduct and culture issues

All 11 banks reviewed will receive individual feedback. Each bank must report back and provide plans to address regulators’ feedback by the end of March 2019.


Bank Incentive Structures

Today we publish our thematic review into how banks in New Zealand incentivise their staff. We found that incentive schemes are highly sales-focused in New Zealand and while a few banks are making significant changes to their incentive schemes, these do not go far enough to prevent risks of inappropriate sales or poor conduct. We expect banks to design and manage incentive schemes in a way that delivers positive outcomes for customers.


Determining whether you are acquiring a business or assets

This month we published guidance for issuers making regulated offers of debt and equity securities.  Under the Financial Markets Conduct Regulations 2014, these issuers are required to provide investors with a Product Disclosure Statement (PDS) that contains prescribed financial information for recent or proposed business acquisitions. The guidance sets out our view of what constitutes a ‘business’ for these purposes, as opposed to an asset. It also sets out additional information issuers should consider disclosing for asset acquisitions.

Dual-language exemption granted

The FMA has granted a class exemption to enable companies who offer investments to publish product disclosure statements (PDS) in both te reo Māori and English. Without an exemption, issuers are effectively prevented from providing a PDS in more than one language due to prescribed length limits and order requirements. We encourage anyone considering relying on the exemption to contact us.

See our exemption page and media release for more information.


Fraud awareness week – 11-18 November

It’s Fraud Awareness Week and this year the focus is on encouraging New Zealanders to Stop and think -  is this for real? before handing over their money. The Ministry of Business, Innovation and Employment is leading the campaign with TV, radio and social media activities. To support them, we have updated our scams pages and have released a new case study with tips on how to help a friend or family member they believe is being scammed.

What’s coming up?

Later this month, we will be publishing 2018 Audit Quality Report. Audit quality is critical to efficient and transparent markets, as well as informed investor-decision making.


FMA news

15 November - Incentives for bank staff too highly focused on sales


14 NovemberSupporting family and friends who have been scammed


12 November - CBL Investigation update


5 NovemberFMA and RBNZ report on bank conduct and culture


29 OctoberExemption passed to enable disclosure documents in English and te reo Maori


25 OctoberFMA publishes annual report 2018


Industry insights

Creating sustainable value from good governance
The Sustainable Business Council, in association with KPMG New Zealand



The role of regulation in encouraging good culture

Financial Conduct Authority



Financial regulation in a digital world

Australian Securities & Investments Commission

We’re hiring

Join a vibrant and dynamic team that embraces work-life balance, a commitment to employee well-being, and opportunities for learning and development.  Check our website to find out more.


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