The Financial Markets Authority (FMA) may have put a dent industry confidence in the regulator’s approach to supervision after string of enforcement actions, DLA Piper partner, Emma Moran, told an industry gathering last week.
Moran said while the FMA 2025 annual report noted a increase in industry confidence in regulatory supervision (rising from 42 per cent to 60 per cent year-on-year), the recent spike in enforcement activities could limit further improvements in this metric.
At the same time, she said as most companies at the sharp end of FMA enforcement have agreed to penalties rather than argue in court there is limited judicial guidance on the nature of alleged breaches and proportionality of penalties.
For example, last month the insurance company IAG was penalised a $19.5 million after self-reporting errors in multi-policy discounting practices that saw clients over-charged $35 million.
The record fine followed a string of sometimes multi-million-dollar settlements with various institutions including ANZ, Kiwibank, Westpac, MAS (Medical Assurance Society) and others in the last few years.
But while the breaches did occur, Moran said the harsh penalties – with little discount for self-reporting errors – could have unintended negative outcomes for consumers.
She questioned whether most insurance companies now removing multi-policy discounts was a ‘fair outcome’ for consumers as per the new FMA regulatory approach.
And the regulator continued to carry out extensive information-seeking missions across the industry, Moran said.
“We haven’t seen any slow-down in Section 25 notices,” she said.
Under Section 25 powers, the FMA can compel firms, and individuals within those companies, to provide information to the regulator on a confidential basis with a risk of criminal charges and large fines for breaches of the order.
At a previous DLA Piper event in 2023, Moran highlighted a spike in Section 25 issuance as a concern.
Along with other legal firms, DLA Piper has also objected to a proposal in the Financial Markets Conduct Amendment Bill (FMC) set to give the FMA powers to search without a warrant.
The Finance and Expenditure select committee is due to report back on the proposed FMC legislation on January 30 following a delay to incorporate recent change to climate-reporting and other government tweaks.
On the upside, the DLA Piper crowd heard the new Active Investor Plus (AIP) visa was opening up new opportunities for local fund managers with some $2 billion raised from offshore applicants since inception this April.
Primarily, the AIP visa has driven flows into local private credit and venture capital funds but more mainstream managers could benefit, too – albeit with a caveat that a change of government next year might see the regime discontinued.
In other goodish news, DLA Piper consultant, Alasdair McBeth, noted a spin-off to the long-running GST-on-fund-fees saga could come to a happy-ending before Christmas this year.
McBeth said industry was working closely with government to clarify the GST status of fees in retirement schemes (including KiwiSaver).
In April this year, the IRD concluded a multi-year debate with a decision that fund fees would be exempt from GST, although the tax charge still applies to outsourced administration services: the change is set to apply from the next financial year.
However, retirement schemes were carved-out for further GST consultation in July.