The Financial Markets Authority (FMA) will waive its duty to prosecute entities and individuals under its watch for “statutory or regulatory” breaches due to COVID-19 – at least in the short term.
In a note published last Friday, the FMA says many firms are facing “practical difficulties” in complying with regulations as the coronavirus lockdown continues.
“Where a market participant breaches, or expects to breach, a regulatory obligation as a result of the COVID-19 circumstances and seeks relief from the FMA, the primary approach we intend to take is ‘no-action’,” the note says.
KiwiSaver providers have been the first to benefit from the ‘no action’ action with a one-month extension of the deadline (now set for May 31) for supplying annual return data to the FMA.
The regulator is accepting fee-free applications by email for relief with follow-up interviews possible.
If relief is approved, the FMA says it would not take action if a breach occurs but such a move “does not necessarily preclude third parties from taking legal action in relation to the same conduct or conduct of that kind”.
Furthermore, the regulator says “there is a general expectation that where possible, breaches will be remediated at a later date, and as such the requirement to comply is being delayed rather than removed”.
“We also expect market participants will take steps to mitigate any risks resulting from the breach,” the FMA says.
“The ‘no-action’ approach is not intended to apply to ongoing and open-ended breaches, or where there is significant risk of customer detriment. Exemptions may be required in certain, limited, circumstances, however we expect to deal with most requests for relief due to COVID-19 with this ‘no-action’ approach.”
But the FMA also reserves the right to withdraw relief if applicants are found to used false information to side-step their regulatory obligations.
“Should additional factors come to light that call into question the bona fides of the information provided, we may revisit our stance,” the note says.
Among a raft of other regulatory communications last week, FMA chief, Rob Everett, laid out “conduct expectations” of financial services firms during the crisis.
In a letter to heads of all financial services businesses, Everett says the regulator would closely monitor the industry to ensure it served the needs of consumers first.
“The wide-ranging regulatory relief we have offered is all aimed at allowing you to continue to focus on serving the needs of your customers,” he says in the letter. “Our expectation remains that you should be treating your customers fairly in all interactions.”
Specifically, the FMA expects financial services firms to take account of changed customer circumstances, communicate effectively with clients and continue to monitor “operational resilience and conduct risk management”.
“Our focus is on maintaining market confidence and integrity, including taking swift action against misconduct that seeks to take advantage of the current COVID-19 crisis,” Everett says. “This includes enforcing the fair dealing provisions of the Financial Markets Conduct Act 2013 relating to misleading and deceptive conduct.”
Last week the FMA also published:
- work safety guidelines for financial services businesses under the impending Alert Level 3;
- relief measures for independent anti-money laundering audits; and,
- a ‘reminder’ of inside information restrictions and reporting duties relating to NZX-listed companies.
