(Notes may differ slightly from speech as delivered)
Tēnā koutou, tēnā koutou, tēnā koutou katoa.
Ko Samantha Barrass taku ingoa, ko taku mahi ki Te Mana Tātai Hokohoko, ko te Mana Whakahaere.
Tēnā koutou, tēnā koutou, tēnā tātou katoa.
Thank you very much for inviting me to speak today. Last year's FSC Outlook was a particularly momentous one and something of a launchpad for the financial services reforms undertaken by the new Government. This includes significant changes for the FMA, including the transfer of CCCFA responsibility and streamlining of conduct regulation.
Amidst these recent reforms, 2024 has seen the FMA focus on smoothly implementing a number of new regulatory regimes. Going into 2025 we are looking beyond implementation and into the practical approach we are taking and will look to take to our expanded regulatory remit.
When I spoke to you in September last year, I said that the FMA was very focused on working to make sure that our regulation practically shifts the dial for New Zealanders. This year is about making how we want to do that, real for the firms we regulate.
As we have said before, we approach our role with the underlying philosophy that we cannot simply regulate for the sake of regulating. We are constantly considering whether it passes the 'so what' test.
In a nutshell, it's about focusing on the things that matter. That is, thinking about the end results we want to achieve and ensuring the work we do reflects that.
While this has already been our approach to some sectors over the past year, in 2025 we will step up this approach in a way where you should see a tangible difference.
So, what are the things that matter?
· As a financial conduct regulator, we are of course focused on making sure that consumers and investors are rightly confident that firms will treat them fairly.
· Closely intertwined with this is our overarching statutory objective of fair, efficient, and transparent financial markets.
· We also want to ensure our regulation is consistent with growing the economy and enabling innovation. New Zealanders should have access to the leading edge financial services and products that will enhance their lives.
Our recent approach to Financial Advice is a good example of our focus on the things that matter. While we have been encouraged by the progress made since the introduction of the new regime, a key theme in our insights report last year was the distinction between a tick-box versus purposeful approach?
We offered examples of how good practices were not always about meeting regulatory requirements to the letter of the law, but also about shifting the dial on how regulation positively impacts the value of advice and the level of consumer trust and confidence in seeking financial advice.
Our monitoring of financial advice providers has continued to evolve, focusing on what compliance is actually achieving. We have seen some providers take what seems to us to be overly conservative approaches to meeting their regulatory obligations. We will want to understand the reasons for this, particularly to check that business models are not being skewed by an unnecessarily cautious approach to compliance thereby creating friction and restricting the availability of advice.
In these cases, our feedback isn't focused on 'doing more compliance' but working with firms to understand the roadblocks and to rethink how they are approaching their decisions for achieving the overall purpose of the financial advice regime.
This is regulation with a purpose, not regulation for the sake of it.
Our focus on the things that matter extends beyond just our monitoring and supervisory relationships. We are also applying this focus to the wider work we do to support innovation and growth.
In December, after working closely with FinTech NZ and Minister Bayly, we launched a pilot regulatory sandbox and opened it up to expressions of interest.
Sandboxes allows us to partner with firms to test innovative products, services or business models. Sandboxes can help spur and incubate innovation by allowing both startups and established firms to test new products and services in a controlled environment.
Taking a pilot approach gives us the chance to gain greater insights into the benefits and risks of financial innovation and new technologies. By testing a product or service in a regulatory sandbox, we should be able to better assess the viability of innovative products and services and gain insights into the innovation's potential impact on investors and consumers.
We've received 14 expressions of interest already and have been impressed by the quality and breadth of the applications. We are doing this in two cohorts, and are in the final stages of confirming the first round of successful applicants who will take part in the sandbox. We look forward to announcing them in the coming weeks as we work to make the pilot a reality.
Well-regulated financial markets are a cornerstone of a successful economy.
We have been pleased to work alongside industry on Minister Bayly's priorities. The roundtable discussions involving FMA staff, MBIE officials and representatives from across industry have been invaluable.
I'm sure the Minister's announcements following the work done in these roundtable discussions will have been welcome to many of you. We support the proposed changes to make prospective financial information voluntary for IPOs. We are also supportive of the consultations exploring ways to support KiwiSaver investment in unlisted assets and adjusting the thresholds for the climate disclosure regime.
Part of the FMA's role is to promote innovation and flexibility while also ensuring consumers understand what they are buying.
A good example of this is the wider work being done to encourage further investment in private markets. We can see the potential benefits here for New Zealand investors and the economy. We can learn from other jurisdictions, like Australia where levels of investment in private markets are much higher than here. We must also apply a New Zealand specific lens to the issues, ensuring we reap the benefits of this investment while ensuring investors clearly understand the implications of this for their retirement savings.
Our job as a regulator is to help identify what the industry needs to do to navigate risks and opportunities, and raise awareness of short-comings that may result in poor consumer and investor outcomes. Liquidity risk management, or LRM, is one practice the industry needs to be particularly good at as we move into greater investment in private markets. Our concerns around LRM are long-standing, dating back a number of years. While our Board debated whether we might take a firmer approach here - such as through enforcement action or more detailed regulations - ultimately, our preferred approach has been to trigger sector-wide conversations in the first instance. That's why we updated our guidance last year, and why firms should expect us to take further interest in their practices in the future.
The Prime Minister's State of the Nation speech made it very clear that the Government's focus this year is on growth. Everyone in this room has a role to play in growing the economy. Including us.
If there are specific examples of unnecessary barriers you face when trying to comply with regulation, please do raise them with us. We have a track record of listening to these and working together to find solutions.
In the past year alone, we have had conversations with firms on barriers they are facing with New Zealand's capital markets settings. We've also been pragmatic and flexible when it comes to exemptions for CoFI licensing, as well as climate-related disclosures. We will continue to explore whether there are other unnecessary barriers with you in our meetings this year, and welcome you proactively raising issues with us as well.
A key focus for us has been - and will be again this year - about working closely with industry to smoothly deliver regulatory change.
That work includes preparing for new regulatory functions on the horizon, as well as finetuning parts of our expanded remit that are already in force.
Among them, the CoFI regime comes into force at the end of next month. I do want to take a moment to pay tribute here to all the people within your firms, as well as our licensing and frontline supervision teams. I know there has been a lot of hard work on all sides. Everything is currently on track, with 67 licences issued to date.
We will continue to support the industry during the implementation of CoFI, which includes the release of an insights report on fair conduct programmes. This will highlight observations we've made through engagement with firms during the licence preparation and assessment period.
As you will know, over recent years we have taken enforcement action against firms who have not delivered on promises about products and services, which have in turn detrimentally impacted their customers.
Misleading and deceptive conduct will continue to be an important enforcement priority for us across the market. There are many important lessons for all firms to take away from our enforcement work, and this year we will be increasing our proactive engagement with the industry to talk about our approach to enforcement and the outcomes that we are seeking from our work.
As we commence our CoFI supervisory work from April, we will be looking at firms where there has been limited or no-self reporting in the past. A particular area of interest will be around the fact and content of regular product reviews These reviews are all the more important when we consider how customers may have been disadvantaged over long periods of time when reviews are not undertaken.
The introduction of CoFI is particularly timely when we look at some of the key priorities of the Government, namely competition in the banking sector.
When we think about the systemic issues that underpin low innovation and lack of consumer choice of financial products, some of the changes firms might make under CoFI will help serve to increase competition. This includes looking into systemic issues that reflect a lack of competition and can be dealt with as a matter of conduct regulation, such as legacy IT systems which lead to poorer outcomes for consumers.
How firms implement their fair conduct programmes could also inform issues relating to customers switching to competitors, impediments to innovation, and enabling distributors, such as mortgage advisers, to provide greater transparency to support decision-making by their customers.
The Government's decision to shift responsibility for CCCFA from the Commerce Commission to the FMA has also been a big focus for us this past year.
The transfer of Credit functions is a big change for regulators, and for industry. On the FMA side, hundreds of firms will be regulated by us for the first time, streamlining New Zealand's regulation into a proper twin peaks framework. There will be more emphasis on supervision and monitoring of the sector. These are significant changes for the CCCFA regime, and will take time to bed in.
For now, the Commerce Commission remains the credit regulator, and it is important everyone continues to work to the current system until the legislation is passed and the handover is complete.
As we await the introduction of legislation, we are working to have all the groundwork in place by the second half of this year.
Work to modernise New Zealand's insurance law reached a significant milestone last year with the passage of the Contracts of Insurance Act. We will start to engage with industry, ahead of commencement, around how we can work collaboratively for the benefit of consumers. This includes supporting their customers to understand what the changes mean for them.
All these changes bring us more in line with international norms in financial regulation by giving the FMA the tools it needs to be a modern conduct regulator. With that in mind, we are excited to introduce a new publication this year, called the Financial Conduct Report.
In some ways, the Financial Conduct Report will be to the FMA what the Financial Stability Report is to the Reserve Bank. It provides an opportunity to consider risks to consumers, investors and markets posed by conduct in the sectors we regulate.
The Report will highlight key conduct issues and how we have responded, as well as showcasing good practices across the industry. It will provide a forward-looking view of the key risks on the FMA's radar, so you better understand our regulatory priorities and what to expect from us.
We will publish our inaugural report midway through the year.
So, to summarise our priorities for the year ahead:
· we will be focused on the things that matter most when it comes to our regulatory approach;
· we will apply that same focus to support innovation and grow the economy; and
· we will continue to smoothly deliver our expanded regulatory remit.
This year is about making it real for our stakeholders. Over the course of the year, we hope you will see some tangible differences made in pursuit of our statutory purpose of promoting and facilitating the development of fair, efficient, and transparent financial markets.
The FSC and its members are crucial partners in all of this work, and I look forward to continuing the constructive relationship with your industry body, under Kirk's leadership.
Thank you again for inviting me to speak with you this morning, and I welcome any questions you may have.
