Guidelines around conduct in the financial markets
released by the Financial Markets Authority (FMA) last week were created without clear relevant statutory basis and are open to subjective interpretation, according to a top NZ lawyer.
Chapman Tripp partner Ross Pennington said while the guide brought the topic of good conduct in financial markets to the fore, the rules were somewhat ‘fuzzy law’, in that they had been created without a clear and relevant statutory standard.
He said: “The guidelines are open to subjective interpretation – similar to the NZX’s ‘Good Broking Practice’ – and vulnerable to swing with the mood of the
FMA, as is happening in Australia with the Australian Securities and Investments Commission (ASIC) targeting banks in its crackdown on financial misconduct.”
He said the guide was also at odds with the Government’s response to the Securities Law Review discussion paper that expressly rejected a statutory duty to ‘treat customers fairly’.
“Instead, the basic Fair Dealing standard is essentially an ‘anti-fraud’ one to avoid misleading or deceptive statements or conduct. It also bears some resemblance to the controversial MiFID regulations in the EU,” he said.
Despite its shortcomings however, the guide did identify key concepts for financial service providers the FMA regulates to focus on when considering whether their businesses were engaging in good conduct, he said.
“It’s starting the conversation in this area and attempting to clarify what the FMA will be looking for when it comes to enforce the FMCA’s conduct obligations.”
Pennington said the guide should be given ‘careful consideration’ by directors and senior managers of all licensed providers, as part of determining what constitutes good conduct in the context of their particular business and how they demonstrate on an ongoing basis that they meet their obligations under the FMCA.
Meanwhile, both
life and general sides of the insurance industry had welcomed the guide, with
IAG saying it reiterated a lot of the work it was already undertaking internally, and Sovereign saying it was in line with the industry’s increasing transparency and customer-centric approach.
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