Compliance

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Page last updated: 08 May 2019

Our compliance approach

We take a risk-based approach to our monitoring and surveillance activities, meaning we prioritise resources to those participants or practices that present the greatest risk to fair, efficient and transparent financial markets.

In considering risk, we use our market intelligence and research to identify potential problems, assess the likelihood that poor practice or non-compliance will occur, and consider its impact on the market. For example, we take into account the numbers and types of retail customers at risk, the size of their potential losses, and the proportion of the market affected.
We seek to proactively monitor a range of market participants and business models. In this way, we can identify new risks and any compliance themes or areas of poor practice across the market. This work helps us identify any need for guidance and ensure our expectations are practical.
Our monitoring and surveillance work is outcome focused, so we consider whether compliance is achieved and the desired outcomes for customers are delivered.

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Our compliance strategy

Our compliance strategy emphasises a 'top of the cliff' approach and focuses on lifting the standards of the businesses and professionals we regulate.

We seek to foster a culture where all market participants proactively work to set appropriate standards; put in place a robust approach to managing and monitoring compliance and willingly share information with us.

Monitoring outcomes

Where our monitoring or enquiries identify non-compliance, we have a range of tools available to deliver a timely, effective and proportionate response.
We may undertake a further inquiry or expect the participant to adjust its compliance, and we may follow up to ensure that this is done.
In some cases, notices, warnings, directions or enforceable undertakings may be appropriate.
Further or serious non-compliance might result in stronger action, such as suspension or removal of licences or other enforcement action.

We are committed to an open and educative approach so all financial markets participants have clear and well-understood responsibilities. We publish summaries of the aggregate findings from our monitoring and surveillance to assist participants in understanding our expectations and enable them to check their compliance and raise standards if necessary.

Making compliance easier

How we reduce regulatory burden

We recognise that the burden of complying with financial regulation imposes cost, which is borne by those who participate in our market. However, a lack of strong regulation can harm investor confidence and informed participation. It is all about finding a balance so that businesses are able to comply with the law, and also focus on their day-to-day business activities.

We have a suite of tools we can use to reduce unnecessary regulatory burden including legislative and administrative notices and guidance.

Getting the rules right	Working with law-makers to improve our laws Working more efficiently with other regulators
Using legislative notices to reduce burden	Exemptions Designations Frameworks & methodologies Levy waivers Public accountability notices
Guiding and helping businesses	Giving guidance Publishing key documents about our expectations Licensing guides
Working smarter	Staff training on how to minimise burden Simple processes for gathering necessary information Simplifying forms and systems Impoving monitoring visits

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Getting the rules right

Ensuring the regulatory burden is appropriate is a key focus for the FMA. To achieve this we work closely with the Ministry of Business Innovation and Employment on policy and law reform and efficiently with other regulators.

Using legislative notices and waivers

We have legislative, administrative notices or waivers we can use to modify legal requirements when appropriate. These include exemptions; designations; frameworks or methodologies; FMC public accountability designations and levy waivers.

Typically, individual notices help one business.

Class notices have a wider impact - they can affect a larger number of businesses and their clients and can be relied on by many businesses in the same class.

Providing timely guidance

Our Strategic Risk Outlook, Annual Corporate Plan and the Good Conduct Guide tell the market about where we see the most potential for risk or harm, where we intend to focus our resources, and why.
We also provide information on our intended approach
Monitoring and thematic reports give feedback on what we think is good and bad conduct, and our response to that. These reports can also encourage businesses to tell us about emerging issues, understand our approach and tell us about any further need for guidance. View our reports and papers section.

Simplifying the regulatory returns process

When we develop regulatory returns we keep some very clear principles in mind to try to reduce regulatory burden. These are to:

not collect data twice
try to obtain information from other sources first
only ask for information we intend to use
only ask for information that’s readily available to a business (e.g. as part of its normal financial reporting/board information)
consult and seek market feedback before we create regulatory returns
seek feedback on our regulatory return process so we can improve it.

Improving our monitoring approach

We focus our resources on the areas of greatest risk and where we can provide the most benefit. This helps ensure that regulation is proportionate to the risks mitigated, and the benefits to be achieved.

As we evolve and improve our monitoring approach, we try to ensure that monitoring activities are not more burdensome than they need to be. Here are some improvements we have put in place:

reduced monitoring visits for businesses
development of closer relationships with the key businesses we regulate

Having clear standards and processes for licensing

Our licensing approach is risk-based. Applicants who may present the greatest harm will receive greater scrutiny. Applying a risk-based approach to licensing allows us to assess applications efficiently, lessening the need for further engagement with lower risk applicants.

We recognise that clear licensing guides are needed to step applicants through the licensing process. We are continually working to improve our licensing guides, so they are clear and easy to understand.

Using a proportionate approach to enforcement

We have a wide range of functions and powers to achieve our statutory objectives and this capability has been enhanced by the Financial Markets Conduct Act 2013 (FMC Act).

Our action will be proportionate to the misconduct to achieve an appropriate market outcome. In the event of market misconduct, we may intervene on an informal basis or at a low level. However, we are also committed to taking strong action and holding individuals and entities accountable when they break the law and fail to meet the standards that are expected of them.

How we evaluate our progress

Feedback from consultation on specific proposals tells us whether our idea will, actually, produce the intended benefit and where appropriate, reduce relevant compliance costs.

The Ease of doing business survey is one of the ways we measure whether the burden of regulation is proportionate to its benefits. The survey helps us better understand the impact that our work has on market participants and stakeholders. It informs the way we work and our focus on continuous improvement in our effectiveness and efficiency.