Brokers warned of crackdown on compliance

Brokers warned of crackdown on compliance | Insurance Business

Brokers warned of crackdown on compliance
A leading legal expert who helped shape New Zealand’s regulatory reforms has told brokers the Financial Markets Authority (FMA) is going to start holding them to the new standards.

Sue Brown, who is a partner with DLA Phillips Fox, told delegates at this year’s IBANZ Forum that while aspects of the Financial Markets Conducts Act (FMCA) are not new, the level of enforcement was.

The key points of the fair conduct and dealing standards outlined in the FMCA that came into effect on 1 April this year were:
  • No misleading or deceptive conduct
  • No unsubstantiated representations

Said Brown: “Those obligations are not new as such, you’ll recognise them from the core standards of the Financial Advisers Act and also from the Fair Trading Act. What is new is the regulator that is going to enforce those new laws.”

She said brokers must not think that because the rules are familiar to them that they must do nothing.

“Don’t be lulled into a false sense of security by thinking ‘I recognise those standards, I already comply with them’ because the FMA is going to start holding you to those standards in relation to your business,” she warned.

Brown repeated to delegates what the FMA’s director of compliance, Elaine Campbell, had recently told the Institute of Financial Advisers conference.

“It broadens the mandate of the FMA and enables us to look at issues where we have concerns – it gives us an in. Boiled down, the conduct provisions of the new Act say to professionals make sure you put the concerns of the customers first always.”

She said truthfulness was the minimum expectation with professionals expected to go one step further.

“The entire financial services industry needs to stop thinking about what the customer will pay for or what they could sell to the customer and start thinking about what they will actually need and what will actually benefit them.”

Industry players who put their own interests first or who either don’t cooperate with the FMA or cooperate grudgingly and offensively “will see a very different face of FMA,” Campbell had said.

Brown pointed out that while that warning sounded somewhat chilling, Campbell had assured participants wanting to get it right that they would be given every support.

“The FMA has a whole new style and approach and it’s not like any other regulator of my acquaintance,” Brown said.

“Some market participants in conversations I’ve had have asked to be regulated by the FMA rather than by another regulator because they find the transparency much more helpful and the more mature and commercial approach more helpful.”

Brown commended IBANZ for adopting the professional conduct for financial advisers into its own code of conduct and suggested one of the great tactics to avoid being regulated was to behave as if you were regulated already.

“Then you get the autonomy to run your business in a way that’s controlled by you and controlled by your professional bodies rather than by a regulator who comes in from above and reaches into your business and creates distractions that you want to avoid because you want to be out there selling and advising and helping your clients achieve the right outcomes for them,” she said.