Regulators shift focus on outcomes in FMA’s latest update

In March 2025, the Financial Markets Authority (FMA) unveiled a revamped version of its ‘outcomes-focused’ approach after facing criticism for its initial release in November 2023. The first guide, titled Fair outcomes for consumers and markets: A guide to outcomes-focused regulation, left many industry participants unsatisfied and concerned. Following the negative feedback on the original document, subsequent insights were shared to bridge the gap until a fresh interpretation from the FMA emerged.

The latest release, referred to simply as Outcomes-focused regulation (OFR), signifies a shift in the FMA’s messaging. Unlike its predecessor, the OFR is not labeled as a guide or insight but rather presented as an approach. The document emphasizes the FMA’s role as the conduct regulator for financial services in New Zealand, focusing on assisting the regulator in carrying out its functions effectively. While the initial release aimed at aiding firms in meeting their obligations, the new approach grants participants flexibility in determining the best way to fulfill regulatory requirements, eliminating any strict rules.

The OFR serves as a decision-making framework for the FMA to allocate resources effectively, engage in forward-looking supervision, and address conduct that could lead to undesirable outcomes. Instead of getting lost in technical compliance issues, the regulator aspires to concentrate on issues directly impacting outcomes. By providing insights into the FMA’s mindset, the OFR helps participants foresee how the regulator might respond to various matters. Positioned alongside other established guidelines, such as A guide to the FMA’s view of conduct and the Regulatory response guidelines, the OFR acts as a valuable reference for participants to gauge the FMA’s stance on critical issues.

The OFR’s updated tracks feature a more refined list compared to its original draft, with seven distinct outcomes with updated focuses. ‘Fair services’ ensures that products and services deliver on promises, account for risks, and prevent provider abuse of information imbalances. ‘Quality ongoing service’ concentrates on products creating lasting relationships with providers, contrary to the previously broad ‘consumers receive quality ongoing care’ outcome. ‘Improved access to products and services’ now aims at financial markets delivering services and products to fulfill New Zealanders’ needs, aligning closely with the regulatory sandbox pilot initiative.

‘Resilient markets and providers’ broadens its audience to include businesses, investors, and consumers, emphasizing confidence in infrastructure, markets, and providers’ resilience. ‘Market innovation and growth’ removes sustainability aspects, focusing on promoting flexibility and innovation in financial markets. ‘Well-informed investors and consumers’ reevaluates the importance of disclosure in aiding good decisions, streamlining the messaging from the previous release.

Overall, the latest OFR from the FMA presents a more refined and coherent stance on outcomes-focused regulation, aligning its objectives with industry expectations for clarity and flexibility in meeting regulatory obligations. Time will tell how this revised approach resonates with financial service providers as it unfolds in practice.