My research list

Loading My Research List ...

Save my research

Don't lose any of your research. Fill out the form below and have your research list emailed to you.

Register to receive our latest publications

FMA’s Annual Corporate Plan 2019/2020: Our Insights

July 25, 2019


Partners James Hawes, Don Holborow, Andrew Matthews, Michael Pollard
Senior Associates Anastasiya Gutorova

Corporate governance Financial services regulation Digital & new technologies

The Financial Markets Authority (FMA) has signalled, in its 2019/2020 Annual Corporate Plan (ACP) released on Tuesday, its areas of focus for the upcoming year. The ACP marks a much more targeted approach, in specific areas, than in previous years.

The ACP makes clear that the FMA will focus on achieving a limited number of specific outcomes, in various sectors rather than, as in previous years, seeking to further its “wishlist” of desired outcomes. Rob Everett, the Chief Executive of the FMA, acknowledges the different approach, noting that the FMA intends to focus on areas where it will have “the greatest opportunity of achieving desired outcomes and reducing harm”.

The tightly focused goal sheet suggests a more mature and pragmatic attitude by the FMA, to both its role in the New Zealand market and what it can reasonably expect to achieve given the time and resources available.

We have outlined below our key observations.


Governance and culture: The joint RBNZ and FMA ‘Conduct and Culture’ review of banks and life insurers provides a strong undercurrent throughout this year’s ACP.

It is clear that the FMA expects not only the banks and insurers, but all financial market participants, to pay close attention to the outcomes of the review and proactively adopt the recommended changes. “The industry should not be waiting for legislative change or the regulator to come knocking to do the right thing”, says Rob Everett.

In the capital markets space, the FMA has again highlighted the risks posed by ineffective corporate governance, poor culture and limited capacity and experience of directors. This was a major theme in its last year’s plan and it continues to be relevant for the year ahead.


Customer outcomes across all financial services: All in the financial services sector, not just banks and life insurers, will be hearing more from the regulator about the need to promote good customer outcomes. This reflects one of the FMA’s top strategic cross‑sector priorities: ensuring that “regulated firms exhibit a customer-centric culture that serves the needs of customers”. But it goes beyond the historic “do no harm” mantra, calling instead for conscious prioritising of customer interests. It is also clear that sales‑based incentive structures that put at risk the promotion of good customer outcomes will not be tolerated.

This theme also runs through the sector specific analysis. In three out of the four sectors, the FMA’s “desired outcomes” expressly focus on “customer’s wellbeing”. For example, the Investment Management sector is tasked with providing “efficient, stable and well-managed funds and services that prioritise customer-centric outcomes”, and the Banking and Insurance sector is expected to “demonstrate how they serve customer needs”.


Climate change risk disclosure: Environmental, social and governance (ESG) factors are gaining momentum, with the introduction of ESG reporting, establishment of the Green Working Group and a focus on climate change. This year, the FMA will be looking to engage with capital market participants on climate change related disclosures.

This is the first time climate change has expressly featured in FMA’s annual plans, but we expect it, together with the other ESG factors, is here to stay. This reflects an increasing emphasis on social responsibility, which we expect will be a significant influence in the financial markets for the near future.


Regulatory reform: There are a number of upcoming regulatory reforms, including some which will expand the FMA’s remit. One obvious area is law reform flowing from the joint Conduct and Culture review. Another likely change is the establishment of a regulatory regime for custodians in light of the IMF recommendations. The FMA will also be actively involved in implementing the new advice regime for regulated financial advisers. The FMA will be working closely with the policy-makers and industry participants in relation to these changes.


Response to technological developments: The FMA continues to be reactive to new technological developments, especially in financial technology (fintech), rather than seeking to establish any concrete rules in this space. While this uncertainty may be frustrating for companies seeking to establish the next unicorn, it may simply be too hard for the FMA to adopt a more proactive approach given the rapid rate of change.

The FMA’s Innovation Strategy Group will continue to lead the FMA’s thinking and response to fintech developments, and the FMA will continue to monitor activity on its “regulatory perimeter”, being activity which relates to financial markets but may not expressly fall within the FMA’s existing jurisdiction, such as initial coin offerings.

The FMA’s Strategic Risk Outlook (which provides its views on risk and opportunities for the next three to five years) acknowledges that new technologies, including big data, AI and blockchain, will shape the future of financial markets, but provides no concrete guidance on how the FMA will react as they become more prevalent. For now, we must wait and see.