The last assessment in 2003/2004 by the International Monetary Fund (IMF) identified a number of material deficiencies in New Zealand’s framework for securities regulation. The Government’s response was to completely overhaul the regulation of securities in New Zealand through the establishment of the Financial Markets Authority (FMA) and the introduction of the Financial Markets Conduct Act 2013 (FMCA).

The IMF visited New Zealand again in 2016 and undertook a further review of New Zealand’s financial sector. The headline report from that visit was released on 9 May 2017.

The report notes that the reforms since 2004 have significantly improved the framework for regulating New Zealand’s securities markets, but also makes the following recommendations to further enhance that framework:


The FMCA reforms introduced the concept of ‘licensed supervisors’ who are tasked with monitoring the activities of managed investment scheme managers. This regulatory model is unique to New Zealand and the IMF has taken some time to understand it.

While the IMF has acknowledged the challenges and benefits for the FMA from leveraging off the work of supervisors, it has also encouraged the FMA to keep the risks and appropriate responses under constant review. In particular, the FMA will need to ensure that it has oversight of areas relevant to the stability of the capital markets sector, where more technical expertise and a macro perspective are required. It will also need to ensure the quality of supervisor’s work. A time frame of within one year has been recommended by the IMF.


The provision of custody services does not require a licence in New Zealand and falls outside of the direct supervision of the FMA or any other authority.

The IMF has recommended that the Government require custodians to be subject to licensing and supervision. The IMF has recommended a time frame of within 1 to 3 years.

Wholesale Asset Managers:

Wholesale asset management activities are also not covered by the FMCA.

The IMF has also recommended that the FMA takes steps to ensure that it has adequate oversight of wholesale managers. In particular, the IMF has commented that there is insufficient data to determine the size of the wholesale asset management sector in New Zealand. Again, a time frame of within 1 to 3 years has been recommended.

It remains to be seen if the IMF’s recommendations will be taken on board and, if so, in what form. There are number of models for the regulation of custodians around the world and we’ll be keeping an eye on developments in this space.