FMA finds derivatives issuers' weaknesses in assessing customers’ knowledge

​New Zealand finance regulatory body - the Financial Markets Authority (FMA) released a report on its supervision activities over the past 18 months on this Thursday, September 24th. It says large parts of the financial services sector are working hard to meet the FMA’s expectations, but FMA called for further and more widespread improvements to governance and compliance.

The report says FMA has found weaknesses across its regulated sectors in four main areas - governance and oversight, conduct and culture, compliance assurance programmes, compliance and controls.

What’s more, a questionnaire made by derivatives issuers indicated significant weaknesses in assessing customers’ knowledge, experience and understanding of derivatives by issuers. In some cases, issuers had insufficient processes or policies to support their compliance with client money handling obligations. FMA will be applying targeted monitoring to follow up on the questionnaire responses.

Till now, 26 derivatives issuers have obtained derivatives issuers license from FMA, but the status of 4 firms are suspended.

FMA hope this report could help firms learn from the issues raised and evaluate their own conduct and compliance against those issues. The report was based on monitoring engagements, complaints and other information received from January 2019-June 2020.

Rob Everett, FMA Chief Executive also says “Firms need to constantly assess their conduct and culture to ensure good customer outcomes are core to their compliance systems and their overall strategy”

“Good conduct comes from the top. We expect boards and senior leadership to champion customers’ interests, and to demand the systems and processes required to deliver strong governance of these issues.” he continued in the statement.