1. FMA's role
  2. What we do
  3. How we regulate
  4. Compliance

Compliance

Our compliance philosophy


As part of our compliance philosophy we:

  • Work with industry to help them comply with our expectations, so there is an improvement in overall behaviour and performance across financial markets
  • Establish a framework that encourages participants to quickly report and correct errors or regulatory breaches
  • Where breaches are identified, we take appropriate and timely action.

Our compliance strategy

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

We are seeking 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
  • Willingly share information with us (including reporting breaches).

Our regulatory framework

Our monitoring and surveillance work is outcome focused, so we consider whether compliance is achieved and the desired outcomes for customers are delivered.

To this end, our activities often start by asking senior management "how do you know your organisation is compliant and adopting appropriate behaviours?"

We expect senior management to champion a culture of 'doing the right thing'. This includes putting in place appropriate monitoring activities such as independent compliance checks or internal audits, information systems tracking key compliance controls, and dealing with any breaches and associated remedial actions as they arise. Senior management should challenge all levels of management on results when necessary.

Intelligence and risk-based 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.

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 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 licenses or other enforcement action.

We are committed to an open and educative approach so that 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.