#11 Outcomes Focused Regulation

In this special episode of our 5 mins with the FMA podcast, we take a look at outcomes- focused regulation with Liam Mason, FMA Executive Director of Evaluation and Oversight and General Counsel. 

Today we’re releasing a document that provides you with an update on our approach to Outcomes-Focused Regulation. An outcomes-focused approach means we focus on the end results that regulation is aiming to achieve for New Zealand businesses, investors, consumers and financial markets. Focusing on these things ensures our regulatory efforts are proportionate and impactful, rather than getting bogged down by minor compliance matters.

While this has already been our approach to some sectors over the past year, in 2025 we will step up this approach in a way where you should see a tangible difference.

To get the best outcomes for our markets and New Zealanders the FMA will work collaboratively with industry. We’re committed to ongoing engagement with firms and industry groups to support good practices and reduce the risk of poor outcomes for New Zealanders. 

Transcript

Matt

Kia ora, welcome to 5 minutes with the FMA. Today we're talking about outcomes focused regulation. We consulted on this in November 2023 and have since evolved our approach and updated the final document. Here to talk to us about it is our General Counsel, Liam Mason. Liam, can you tell us what outcomes focused regulation is?

Liam

Kia ora, Matt. Outcomes focused regulation means simply that we focus our regulatory efforts on the end results that regulation is trying to achieve for consumers and for financial markets. If we start at that point, it shapes all of our regulatory activities. It helps us to avoid a tick box approach to compliance and it means that we are prioritising the things that matter for New Zealanders, for New Zealand markets. It's something that very much requires the regulator and the industry to both work together to achieve those better outcomes for New Zealand.

Matt

So we got a range of feedback from the consultation, 50 submissions all up. What did the feedback say?

Liam

The feedback was incredibly valuable and the main thing it told us is we hadn't done a good job of communicating this the first time around. What we heard from folk was that there was good support for the themes that we thought were important in the market, but the impression we'd given was that this was an additional set of rules or that it wasn't sufficiently connected to our statutory objectives and to the work that we have to do.

Matt

So moving on from there. What's different about the approach now?

Liam

So the most important difference is we're really trying to clarify that this is about the approach that we take to our job as a regulator, It's not about new rules for the industry. The outcomes themselves are still important. They are what we're using to prioritise our work, and we've clarified those and really connected them strongly with our main statutory objective and the purposes of our legislation, so that means we've connected them with fair, efficient, transparent financial markets with promoting informed participation in our markets. And the other purposes in our legislation, like good information for investors and good governance, reducing unnecessary compliance costs and promoting innovation.

Matt

And why is it that the FMA is moving in this direction?

Liam

As a regulator. We have limited resources, and we need to make choices about what we focus on, and it's critical if we are to deliver on our mandate that we make those choices well and that we're focusing on the things that matter for New Zealand, for New Zealand's markets, for New Zealand's people, and that's what these outcomes are intended to help us to do.

Matt

So, what will be different for industry, what will they experience from the FMA?

Liam

Well, this is an approach that we wanna take up right across the FMA and everything that we do, industry is going to experience it most directly in our market facing functions, our licencing, our supervision, our response and enforcement and our exemptions. And what we're setting out in this document is a new supervisory approach, intended to be more forward-looking and engaging with businesses to build our knowledge of their business models and how they operate and the risks that those might raise for industry and how we can work together to minimise those. And we'll be shaping our supervisory approach by the impact that firms have in the market for larger firms, will be supervising them on a group basis. And for these larger firms, they'll be more interaction with boards and senior management. But right across the board will be looking to ensure that our feedback is focused on important matters, that we're explaining the rationale when we raised something and not focusing on minor compliance issues. The idea there is to work together with industry to ensure that our financial services are delivering well for all New Zealanders.

Matt

So is this all new or has the FMA already been working on this?

Liam

So parts of it are new like the new supervisory approach, but we have been working over the last year or more to take a more outcomes focused approach and the work that we do and there's some examples of that such as the report that we published on an insights report on financial advice providers. Where we highlighted that good practise isn't just about complying with the strict letter of the law, but seeking there to explain how regulation can help to produce better results for customers, therefore, better results for the firms, our liquidity risk manager guidance. Uh, we highlighted there the importance of liquidity risk management for customers and also for market integrity. Um and as well, of course we are launching a regulatory sandbox which is intended to promote innovation and to give startup firms a chance to participate in financial markets to provide financial services in a way that helps them to test their products and is also good for consumers. And and of course there's an example that you can see in our fair dealing enforcement, where we're emphasising the importance that the products that are delivered to customers should match the promises that are made to them.

Matt

I’d just like to touch on the length of time it took to get to this point. I'm sure industry would like to know why it took over a year. Could you shed some light?

Liam

On that? Yeah, sure. It's a good question. And as I've, as I've said before, the feedback that we see received was really valuable to us. But it told us that we needed to change the approach, change how we were communicating this. And so we've taken the time to do that and we've taken the time to really make sure that the message that we're putting out there explains that this is about how we make our choices, how we prioritise. It's not additional regulatory burden. It's not a new set of rules.

Matt

And if industry would like to learn more about OFR from the FMA how can they do that?

Liam

They can contact anyone at the FMA to help them to, to understand this and particularly their relationship manager or designate.

Matt

Thanks for joining us today Liam, and if you would like to read the outcomes focused regulation document, you can find it on our website. If you go to www.fma.govt.nz we will see you next time.