The Financial Markets Authority has been criticised and told it needs to tighten its process for handling conflicts of interest.
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Commerce Minister David Clark last year ordered a report from Kristy McDonald QC into the authority's handling of a conflict involving the then chief executive, Rob Everett, when the appointment of default KiwiSaver providers was underway.
Everett was related to a senior executive at KiwiSaver provider Booster, which was already a default provider and subsequently was reappointed.
He disclosed his link and potential conflict when he was appointed FMA chief executive in 2014, which was kept on a register but did not resurface at the time of the KiwiSaver review.
McDonald's report said the conflict was not material because of the FMA's limited role in the default provider reappointment process, but there were shortcomings in the way it handled the matter, and its policy was "not fit for purpose".
"In particular, the FMA did not disclose the chief executive's conflict of interest in its advice to the minister or otherwise when engaging with MBIE about risks relating to the default KiwiSaver provider process. It should have done so."
The authority's board was also not informed, and the register of conflicts of interest was not accessible by the chair or the board.
"In my view, disclosure of chief executive conflicts of interest should always be made to the entity's chair and to the board," McDonald's report said.
"The policy should have expressly required the chief executive to make disclosure to the chair, and for a plan on how to manage the conflict to be agreed with the chair, with that information then to be provided to the board."
The report recommended changes to the way the FMA collected, stored, and disclosed information about conflicts of interest and at what level they should be handled.
FMA chief executive Samantha Barrass accepted the findings of the report.
"As the primary conduct regulator of the financial sector, the FMA's integrity must be beyond reproach.
"We set high standards for ourselves and are implementing all the recommendations," she said.