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GRC Professional : GRC Spring 2011
25 25 You’ve described FmA’s establishment on 1 may as marking a quantum leap forward in regulation. how so? FMA has far greater powers of regulation and enforcement than our predecessor [the Securities Commission], and we exer cise them over a broader range of financial markets entities. FMA differs from many other regulators in that it has twin statutory objectives. Not only will we promote fair, efficient and transparent markets, but we are also charged with growing New Zealand’s capital base. So we’re not just a regulator but an economic ambassador for New Zealand as well. what new powers do you have and what difference will they make? FMA has significant new powers, and many existing powers have been strengthened. These range from our power to sue on behalf of shareholders or companies (if in the public interest), to our greatly extended enforcement powers under a range of laws. These will make a profound difference in our ability to require a higher standard of behaviour in the marketplace, and to police those operating on the periphery. how does the FmA compare to AsiC? ASIC has a holistic and unified regulatory approach, which we’re keen to emulate. It’s also beneficial that New Zealand now operates under a ‘twin peaks’ regulatory model, sharing the role with the Reserve Bank, as ASIC does with APRA [the Australian Prudential Regulation Authority].FMA sees strategic benefits in forging a closer relationship with ASIC. This is part of the Single Economic Market goal that both our prime ministers have committed to. Greater alignment in the way FMA and ASIC regulate has the potential to significantly reduce the costs of trans- Tasman financial services, increase investor protections and support fair, efficient securities markets in both countries. what are your initial priorities? Are there particular areas of concern with regard to governance, risk and compliance? It’s early days still, but I can confirm that we have begun monitoring the financial adviser community, which became fully regulated on 1 July this year. Meanwhile, we’re working to establish a new market intelligence function and will seek to foster strong communication with market players. when it comes to compliance, what’s more important: the carrot or the stick? The role of the enforcer is not just to send people to court, it’s also about educating the market on the new rules of behaviour required, and that’s what we want to try to do first. Prevention generally represents the more efficient use of finite resources. Where enforcement is necessary, we will focus on conduct that presents the greatest likelihood of harm to open, transparent and efficient capital markets. to what extent is it your role to reduce or eliminate risk? Capital markets are largely about the taking on and offsetting of risk, and no amount of regulation can remove risk from the markets. But the regulator can reduce risk by setting clear, consistent rules and enforcing them. ••• the role of the enforcer is not just to send people to court, it’s also about educating the market on the new rules of behaviour required, and that’s what we want to try to do first.
GRC Summer 2012