The FMA’s guide designed to help providers focus on good conduct

The FMA has published the final version of the guide into the FMA’s view of conduct. The FMA has also published submissions from industry, considered as part of the consultation process.

The Financial Markets Conduct Act’s focus on conduct is a significant shift in financial services regulation. It means the FMA will assess providers based on their conduct, which is what their customers experience from products and services.

A media release says the FMA will take a risk-based approach to monitoring conduct and compliance with financial markets legislation. It will do this by assessing which providers and what conduct are mostly likely to pose risks to fair, efficient and transparent markets – and harm to investors and consumers – and direct its regulatory attention and effort accordingly.  That assessment will take into account the way the FMA understands the broad approach taken to investors and customers within providers.

 In response to submissions from providers, the guide further clarifies that it doesn’t create, replace or even supplement existing legal obligations. Rather, it signals that the FMA will be using a conduct ‘lens’ – and how that lens will be used – in monitoring and supervisory activities, and general interaction, with providers.

The guide sets out a ‘conduct profile’, summarising the FMA’s expectations about what providers should be able to demonstrate to their customers, focused on five key areas:

·         Communication – listening to customers’ needs

·         Controls and governance systems

·         Culture – leadership and behaviour

·         Capability – competence and experience

·         Conflicts – aligning customers’ interest with business strategy.


 Liam Mason, FMA director of regulation said, “While we hope the conduct guide and its contents will be considered relevant across all financial services, it was created for the sectors that we regulate under the FMC Act so they have a clear idea of what we will be looking for when we are monitoring.”

Authorised Financial Advisers have a code of conduct (AFA Code) that they must comply with and which is enforceable under the Financial Adviser Act (FAA). As such it should be emphasised that the guide does not change any aspect of the AFA Code nor is it intended to operate in the same way for broader financial services.

“As we assess risk and harms in the market, our focus will be on whether the providers we regulate have the interests of their customers at heart. In particular, how that customer-centric perspective is embedded within the way they approach compliance obligations and their business activities more generally,” Mason said.

The guide recognises the imbalance of information and expertise between users of financial products and those making and selling them. An additional, consumer-focused guide will be published shortly to further help consumers understand what they should expect from their financial services providers.

 The guide to FMA’s view of conduct (including summary of submissions and a copy of each submission)


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