QC’s Report on FMA Leaves Questions To Be Answered

QC's Report on FMA Leaves Questions To Be Answered 2

The 50 page report by QC Kristy McDonald on conflict of interest issues faced by former FMA Chief Executive Rob Everett is likely to usher in tighter controls over conflict of issue questions for government agencies and departments.

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The McDonald report related to a conflict of interest Everett had with brother-in-law Gary Scott, the CFO of Booster. Although Kristy McDonald did not say that the conflict did not influence the decision to have Booster made a default KiwiSaver provider, which it achieved in 2014 as having the lowest fee in the Kiwisaver market.

The FMA took steps to exclude Everett from the KiwiSaver default appointment process last year but the potential for conflict should have been disclosed to both the board and the responsible Minister, the report said.

Her report also said that the holes in the FMA chief executive conflict management policy might be a government-wide issue.

“It may be that conflict of interest policies of other public service organisations similarly fail to address the unique position of their Chief Executives.”

“That question is outside the scope of my Review.”

She said that requirements by some to have conflicts-of-interest registered with board access would significantly extend the current rules regarding Crown entities and having looked at the Australian Securities and Investments Commission policy there was no similar such requirement.

“I recommend changes to the FMA’s Conflicts of Interests policy below, but the issue of public disclosure of FMA member and staff interests is a matter that would have to be the subject of a broader review.”

FMA Boss Samantha Barrass

“As the primary conduct regulator of the financial sector, the FMA’s integrity must be beyond reproach,” incoming FMA Chief Executive Samantha Barrass (pictured) said in a statement. “We set high standards for ourselves and are implementing all the recommendations.”

She had earlier outlined the FMA priorities in a Financial Services Council (FSC) webinar, identifying advisory regulations, conduct, cyber-risk, climate disclosures and KiwiSaver value-for-money rules as high on the FMA agenda.

She also noted that there would be heightened security over the wholesale investment sector, a factor that had been identified by the International Monetary Fund recommendations in a 2017 review of New Zealand’s financial markets.

“We are particularly focused on whether/ the extent to which vulnerable consumers and people who are, in practice, retail investors are accessing wholesale markets and the harm this may cause them and their families,” Barrass said.

She said the FMA would see “substantial change” over the next few years as its ambit and budget expand.

“Our staff will need to develop new skills and we will need to work with you, in industry, to better understand some of the new sectors we will be regulating,” Barrass said.

“Fortunately, I’ve led a number of organisations through periods of change.  I don’t underestimate the challenge but I’m up for it.”

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