FMC Act – Begin the begin

1 December 2016 heralds the end of the transition period and the start of the brave new world of financial market regulation under the Financial Markets Conduct Act 2013.  As a result, the root and branch reform that began with Rob Cameron’s Capital Markets Development Taskforce in 2008 has generated a new regime (and a new regulator) for the oversight of financial markets activity.

The new regime under the FMA has seen the introduction of licensing of a variety of participants in the financial services sector during the course of the transition period which began in 2014 – including trustees, supervisors, platform providers (such as equity crowdfunding platforms and peer-to-peer lenders) and managers of managed investment schemes.

In its recent public statements, it is clear that the FMA will seek to use its powers to bring about what it sees as a transformation in the financial services sector by seeking to embed high standards of conduct on the part of financial service providers.

The FMA says that the process of standard setting (and lifting) has imposed significant challenges for some parts of the sector.  At the same time, the FMA notes that it has tried hard to impose additional compliance and other burdens only where it saw a clear benefit to investors and the markets – as well as avoiding unnecessary barriers to entry for new players.  In this regard, the FMA has also undertaken stakeholder surveys which, it says, show that the industry understands the new regulatory framework is designed to maintain market integrity – and not just impose a thicket of new compliance obligations.

However, as well as providing the framework for the FMA’s ‘conduct lens’ for evaluating the activities of participants – the FMC Act brings the regulations of some financial market activities into the 21^st century and providers both clarity and wider scope for fund-raising activities, particularly by SMEs.  This is achieved without some of the uncertainties or unnecessary elements that made such activities uncertain or uneconomic under the old regime.  The challenge now is for business to utilise the opportunities presented by new regime, whilst managing the expectations of stakeholders and (where relevant) those of a regulator with a much greater role and much more extensive powers.