FMA leans against 'market knows best' view in new conduct guide

New code is aimed at making sure firms have the customer at the forefront of their minds.

The Financial Markets Authority brushed off claims the market was the best arbiter of fixing any problems in the sector in settling on a new guide for the conduct guide.

This is aimed at making sure firms have the customer at the forefront of their minds.

The market watchdog released its final guide on how it views conduct and what it sees underpinning good practices, which had its genesis from talks with firms wanting a better understanding of how the FMA expected them to approach certain issues.

Among submissions was a claim the market was "a better determinant of whether products and services meet customer need", something the FMA says is "worryingly complacent about the amount of harm that can be caused to customers before the market eventually 'solves' the issue."  It says regulation and signalling a view on conduct is "appropriate."

"There is such an imbalance of power and information between those who provide the products and services and those who consume, that we feel in the context of this guide, that it is worthwhile pointing out the need to have a focus on customer outcomes, which is possibly more self-evident than in areas of industry where there's less of an imbalance between buy and sell," FMA regulation director Liam Mason says.

The new guide will be incorporated into the FMA's risk-assessment and will help companies' understanding of how the regulator monitors conduct. Mr Mason says the regulator hopes to be having conversations with firms this year.

Some financial services firms have already started thinking about how to meet the guide, particularly those companies with international connections, he says.

The FMA finished the introduction of the licensing regime in November with fund managers the last group of firms going through this part of the securities legislation overhaul. The regulator and will now have a greater role monitoring the sector with the government signing off on extra funding via an increased industry levy late last year.

(BusinessDesk)

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