REVIEW - The Financial Markets Authority (FMA)

Photo: financebrokerage

The Financial Markets Authority plays a critical role in capital markets and financial services in New Zealand. It is the country’s government agency responsible for financial regulation. It regulates all financial market participants, exchanges, and the setting as well as enforcing financial regulations.

Enforcing securities, financial reporting, and company law apply to financial services and securities markets. It also regulates securities exchanges, financial advisers and brokers, auditors, trustees, and issuers, including issuers of KiwiSaver and superannuation schemes. In short, the FMA and the Reserve Bank of New Zealand (RBNZ) jointly oversee designated settlement systems in the country.

History

The FMA was established on May 1, 2011. It was part of the Financial Markets (Regulators and KiwiSaver) Bill.

This was passed by the New Zealand parliament on Apr 7, 2011. It was established in the wake of criticism over the failure of the previous regulatory regime. However, the previous regulator failed to help a large number of finance companies and stem investor losses. That was in the period between 2006 and 2010.

In fact, it formed as an Independent Crown Entity. Meanwhile, in the year 2014 they began working under a much wider mandate with the introduction of the Financial Markets Conduct Act 2013. In other words, they now also have an extended range of regulatory tools available to achieve better outcomes for investors, financial markets professionals, and businesses.

Moreover, the Commerce Minister Simon Power introduced it as a “super-regulator”. Its purpose was to restore investor confidence battered by the finance company meltdown and the global financial crisis.

Furthermore, it took over the functions of the Securities Commission of New Zealand and Government Actuary which were disestablished. In fact, FMA consolidates other regulatory functions fragmented across the Ministry of Economic Development (New Zealand). That includes the Companies Office and its National Enforcement Unit.

Structure

Certainly, a board is appointed by the Minister of Commerce that oversees FMA. Thus, the Chief Executive Rob Everett, runs FMA and Mark Todd, the Board Chairman leads the organization.

Seven Priority Areas

For instance, FMA has seven strategic priority areas which are: Governance & culture, conflicted conduct, capital market growth & integrity. Additionally, they also include sales & advice, investor decision-making, effective frontline regulators, and effectiveness & efficiency.

Businesses, professionals and markets regulated by the FMA 

These are entities that the FMA regulates through direct licensing or authorization. In other words, those who are licensed or registered by other agencies but may be subject to elements of laws they enforce. It takes an interest in other products and markets not directly in its remit but linked to financial markets.

Sector: Firstly, the Retail Product and Service Providers

FMA licensed/authorized: Derivatives Issuers (DI) Managed Investment Scheme (MIS) managers including KiwiSaver providers

Licensed or registered by others: Banks, Non-bank deposit takers, Insurers, Foreign exchange providers

Sector: Secondly, the Advisers and Discretionary Managers

FMA licensed/authorized: Discretionary Investment Management Service (DIMS) providers, Authorised Financial Advisers (AFAs), Qualifying Financial Entities (QFEs)

Licensed or registered by others: Registered Financial Advisers (RFAs)

Sector: Infrastructure providers

FMA licensed/authorized: Licensed financial product markets, Designated settlement systems

Licensed or registered by others: None

Sector: Alternative capital raising

FMA licensed/authorized: Peer-to-peer lending providers, Crowdfunding providers

Licensed or registered by others: Certain other products and markets, eg cryptocurrency exchanges

Sector: Frontline regulators

FMA licensed/authorized: Supervisors, Licensed independent trustees, NZX (Regulation), Accredited audit bodies

Licensed or registered by others: Registered audit firms, Licensed auditors

Sector: Other market participants

FMA licensed/authorized: International auditors and audit firms

Licensed or registered by others: Brokers, Custodians2, Providers of products and services to wholesale clients2

Sector: Issuers

FMA licensed/authorized: None

Licensed or registered by others: Debt and equity offers, and related financial reporting

How the FMA Regulates or Functions?

All in all, its regulatory functions support its strategic priorities.

• Monitoring and supervision – To help build investor confidence, it assesses and monitors compliance, conduct, and competency of market participants.
• Investigations and enforcement – It intends to raise investor confidence by taking timely and proportionate enforcement action and by seeking compensation for investors where appropriate.
• Policy and guidance – It provides information and guidance that assist firms and professionals in complying with the law.
• Licensing – It licenses a range of firms and professionals that meet the requirements of the law.
• Education and information – It partners with public and private organizations to develop and promote educational resources and messages to help investors make better investment decisions.

Reprinted from financebrokerage, the copyright all reserved by the original author.