The Financial Markets Authority is warning financial service providers not to expect leniency when they dob themselves in after breaking the law.
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In a speech to clients of the lawfirm MinterEllisonRuddWatts, the Authority laid out what it expects of providers when they are under investigation, especially with the passage of the Conduct of Financial Institution Bill through parliament - which will see banks, insurers and non-banking deposit takers come under its purview.
"It's critical that industry should not be surprised by our approach to regulation, supervision and enforcement," FMA acting general counsel Karen Chang said.
The Authority said the top three priorities of every firm that holds a license with the FMA, or plans to in the future, should be self-reporting breaches, fixing errors with customers in a timely fashion and addressing inadvertent misconduct issues.
"The right way involves promptly informing your board, self-reporting to the FMA, and ensuring timely remediation and communication with customers," Chang said.
She cautioned firms about the temptation to deal with their problems first, before making contact with the regulator.
The ANZ Bank is a recent example.
It took more than two years to notify the regulator about an error that occurred in its systems, whereby credit card insurance policies for some customers were duplicated but no additional benefits were provided.
The FMA later filed charges against the country's biggest bank in the High Court.
"You can be confident that the choices made by an entity after discovering the problem will be relevant to the FMA's enforcement response and will often colour how we view the entity's overall conduct.
"At the same time, self-reporting cannot provide immunity from litigation, especially if the issues are significant, systemic or have led to customer harm."
When determining what action it takes when firm that breaks the law, Chang said the underlying misconduct would always be the driving factor and delayed, or incomplete self-reporting would also be considered.
She said the Financial Markets Conduct Act had been in force for a long time and firms should not be surprised when the FMA takes action when it comes across egregious conduct, systems errors that should have fixed earlier, or unsuitable financial products.
In the past year, the Authority had published guidelines on what it expects of firms advertising financial products, warned insurers about overcharging customers for poor value products, and said it would be [https://www.rnz.co.nz/news/business/452624/fma-taking-harder-line-on-anti-money-laundering-rule-breaches taking a harder line on financial service providers who failed to comply with anti-money laundering and counter terrorism financing laws.