The Financial Markets Authority published its Enforcement Policy on 12 September 2011, in an effort to "assist financial markets participants to have a clearer understanding of the FMA's role, functions and priorities".
The FMA's Enforcement Policy is a relatively high level overview of the FMA's attitude to breaches, both minor and material, of legislation relating to financial markets such as the Financial Advisers Act 2008, the Financial Service Providers (Registration and Dispute Resolution) Act 2008, the Securities Act 1978, the Securities Markets Act 1988, the Anti-Money Laundering and Countering the Financing of Terrorism Act 2009, the Companies Act 1993, the Financial Reporting Act 1993 and the Corporations (Investigation and Management) Act 1989.
The FMA has expressed a commitment to enforcement action which targets, as a priority, failings or breaches which are intentional or reckless or involve other serious unlawful conduct, and where the perpetrator has set out to intentionally mislead or deceive innocent investors. Initial priorities for enforcement action are likely to include:
- Monitoring compliance with the new financial service providers and financial advisers regimes (from 1 July 2011)
- Monitoring compliance with the new requirements for trustees and statutory supervisors (from October 2011)
- Monitoring compliance with the new auditor regulations (from 1 July 2012)
- Monitoring the compliance of KiwiSaver sales and distribution processes
- Close monitoring of traded markets in conjunction with NZX
- Monitoring compliance with the new anti-money laundering • regime (from 30 June 2013).
The Enforcement Policy reflects a commitment by the FMA to engage in "proportionate enforcement action" and in the case of market misconduct, to intervene on an informal basis or at a low level in the first instance, where it is appropriate to do so. Whilst the Policy makes it clear that the FMA intends to use its wide range of functions and powers swiftly and decisively to hold individuals and entities (including in some cases, their third party advisers) accountable for breaches, it is less likely to pursue matters that are one-off, isolated or minor events relating to technical errors.
The overriding considerations in deciding whether to take enforcement action will be whether enforcement is in the public interest (including whether the breach presents a risk to the function of open, efficient, transparent capital markets), whether early intervention might be more effective than later enforcement in a product lifecycle, and whether other avenues for resolution such as dispute resolution between private parties may be more appropriate than FMA intervention. The FMA will determine which matters present the greatest harm or likelihood of harm through its surveillance and intelligence activities, information provided by other financial markets regulators in New Zealand and overseas, complaints, tips and information from other agencies and jurisdictions. Enforcement action will generally be publicised in line with the FMA's focus on visibility and transparency.
In addition to the Enforcement Policy, the FMA intends to issue:
- A model litigant policy, which will outline the FMA's intended approach to litigation
- A policy on the FMA's intended approach to conducting investigations.