The Financial Markets Authority (FMA) has signalled a shift towards a more ‘streamlined’ regulatory style in line with the new government’s anti-red-tape stance in its latest four-year plan.
According to the slightly delayed FMA ‘statement of intent’ (SOI) published last week, the regulator will give more weight to the impact of rules on market participants amid a tougher economic environment.
“The FMA is evolving its supervisory approach with industry to focus more on the outcomes that matter for consumers and markets,” the statement says. “This evolution means we will be more forward-looking, and prioritise efficiency and risk-based decisions, to ensure we proactively look to streamline our approach and reduce unnecessary regulatory burden on providers. An outcomes-focused approach also means our enforcement work focuses on conduct that is harmful to consumer and market outcomes.”
But as well as easing-off the pressure on regulated players, the FMA will also adopt a more robust approach to those operating in legal grey zones.
“We will take a proactive stance to deter and disrupt harmful unregulated activities, through strategic engagement, making full use of our regulatory toolkit and broader influence (including through domestic and international engagement), and testing the boundaries of our remit through regulatory and Court actions,” the SOI says. “This is a key transformational shift that we are seeking to make to disrupt partially-regulated actors and unregulated activities on our regulatory perimeter.”
The FMA has made several forays into the wholesale and unregulated markets (pinging property fund manager, Du Val, for example, and cancelling the Validus pyramid scheme) but will pull out more stops under its revised plan.
According to the SOI, the FMA efforts to rein-in trans-perimeter offenders will include “the application of our designation powers, which allow us to re-designate financial products or ‘call-in’ securities, financial advice services, or financial advice that is unregulated, if we consider the risks posed are such that they should be alternatively regulated”.
Samantha Barrass and Craig Stobo – FMA chief and chair, respectively – note in the SOI that the regulator will target “four strategic objectives” over the coming four years, namely:
- evolving its ‘outcomes-focused’ style;
- further developing an intelligence-led approach;
- deterring harmful unregulated activities; and,
- clamping down on misleading and deceptive practices.
“We remain alert to ongoing developments in our operating environment, including economic headwinds and cost of living pressures, that continue to impact financial sector participants and heighten the risk of harm to consumers and markets,” the FMA leadership duo state. “We therefore intend to assess the costs and benefits of our regulatory impact on participants.”
The SOI, which was originally due for publication before the election last year, also says the FMA will release a new ‘conduct report’ in future years in light of its new conduct-licensing duties.
Despite its extra work-load, the FMA budget – which is more than 80 per cent funded by industry levies – is set to remain flat year-on-year at just over $71 million, the latest annual ‘statement of performance expectations’ shows.
The performance expectations report, released along with the new SOI last week, puts the total forecast revenue (including the formal budget allocation of almost $71.3 million plus other income) for the FMA over the 2024/25 financial year at $78.2 million compared to $80 million in the previous period.
FMA staff cost are projected to jump from about $53.8 million over the 2023/24 period to almost $59.5 million in the new financial year with litigation funding also rising $700,000 or so to $5 million.