How we monitor QFEs
Our monitoring and surveillance work with QFEs is:
- risk-based - taking into account information on the nature, scale and extent of the business and the compliance controls; QFEs that only comply with the letter rather than the spirit of the law may be assessed as higher risk
- targeted - based on information received
- theme-based - eg. researching a particular service, or exploration of a potential industry approach or problem
- aligned to the FMA's strategic priorities.
Monitoring a QFE will typically start with discussions with senior management and the QFE's own compliance monitoring team. We will start with the question, 'How do you know your compliance arrangements work?' The robustness of a QFE's compliance monitoring will be a key factor in the amount of surveillance undertaken by FMA. We may also conduct on-site visits and interview other management and staff.
Work focuses on the QFE's capacity to ensure compliance by its advisers. The current focus for QFE monitoring will be on 4 key areas:
- sales and advice
- conflicted conduct
- the effectiveness of the QFE as a frontline regulator
- governance and tone at the top.
In addition, we will continue to explore entity-level conflicts and disclosure.
Our expectations in these areas are covered in the QFE ABS guide and in a summary of feedback from the application process (which can also be downloaded in PDF format below).
Our current monitoring and surveillance activities for QFEs include:
- discussions on issues identified
- reviewing arrangements when notifications are received; we expect QFEs to be able to describe how capacity will be maintained when a business or processes change
- review of QFE Annual Reports, including revised Adviser Business Statements
- following up complaints or queries received about QFEs.
We have already engaged with a number of QFEs about:
- suitability of advice
- management reporting
- the impact of acquisitions
- training for category 1 QFE advisers
- compliance assurance plans.
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