We are often asked whether the regulations we are implementing will make a difference. Are we regulating for its own sake, and imposing process and cost with no benefit?
At a system level, the benefits of having a more robust regulatory regime have become clearer. A recent example is that New Zealand was able to sign the Asia Region Funds Passport because our securities regulation regime is increasingly seen as being on an equal footing with global standards.
I had the privilege of signing that document and took pride in the recognition it represented for how far New Zealand has come. Just as I take pride in New Zealand being a valued contributor at the International Organisation of Securities Commissions (IOSCO).
The work we've done has given us a ticket to the international game in terms of funds management; and in terms of contributing as equals to improving global standards for licensing, supervision, monitoring -- and taking enforcement action against -- financial services firms.
That we no longer look like the securities wild west to the rest of the world is critical if we wish -- as the government's business growth agenda makes clear that we do -- to be a destination for international capital.
That doesn't come if there is no confidence in our markets.
And we have clear signs that confidence is there, and building.
But what about signals from New Zealanders that there are benefits to the new Financial Markets Conduct world?
The Financial Markets Authority's investor confidence survey forms part of our annual performance measures. This year's survey produced interesting results as people were asked for the first time whether they had confidence in the effectiveness of the regulation.
Overall, across the 1000 people surveyed, this new score was reasonable at 60 per cent, but the scores among investors were higher. For people with managed funds and shares, 80 per cent and 75 per cent respectively were confident in the effectiveness of regulation.
Confidence in the markets themselves fell for the first time since the survey started -- from 60 per cent to 56 per cent, reflecting the turmoil in global markets over the last year.
However, these levels of confidence in regulation are early signs that even when the markets are unsettled, it's possible to differentiate between the systems and controls within the regulatory framework and sentiment reacting to market volatility.
There is still a way to go to broaden that confidence across a wider demographic and build deeper, more sustainable market growth where more of the population would be willing to put their money.
KiwiSaver is introducing people to saving for retirement and managed funds but this has yet to translate into more engaged attitudes towards investment.
The full benefits of the FMC Act will not be truly felt by either the industry or consumers for a few more years, and that simply reflects the fact we are completing the build phase of this new conduct regime. But the benefits seen already show that the FMC regime is not regulation for its own sake.
We will not be a destination for international capital if there is no confidence in our markets.
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The purpose of the regulation is to build better markets and services for people to invest their hard-earned money. Longer term success depends on us being an effective conduct regulator. Conduct is literally what the Financial Markets Conduct Act says on the tin.
If firms are, and crucially can show they are, putting customers' interests at the centre of their business, then they have already grasped what good conduct means to us. And what the risks of poor conduct are: Bad customer outcomes and lots of attention from the regulator.
It's impossible to implement conduct regulation without focusing on culture and we highlighted that in our first Strategic Risk Outlook late in 2014. Governance and culture were signalled as primary contributors to help deliver better outcomes for customers. When poorly constructed, they are primary drivers of risk to our markets.
Globally, there is much discussion about whether it's practical or possible to turn culture into a specific obligation, or duty, rather than allowing firms to organically foster their own culture.
To us the reality is simple. Culture drives what actually happens at the businesses and individuals we regulate, which is why it's important. But a regulator has no role in prescribing culture -- that's the job of leadership.
We don't look at, or judge, your values statements or your wellness programmes. We look at things like who gets promoted, who gets paid and for what, and what happens to complaints and incident reports. We judge and respond to you on the basis of how all that translates into outcomes for your customers.
Achieving fair, efficient and transparent financial markets is not a one-off challenge. We see signs of progress, but we certainly haven't cracked it and we're very conscious we won't if we don't work with the financial services industry.
A big part of that is encouraging the industry's more effective and efficient participation in our markets through innovative forms of capital raising; shorter and clearer disclosure documents; and a pragmatic approach to using tools such as exemptions from the rules to avoid unnecessary cost and burden.
I believe the mandate we have been given, and the way we implement it, is starting to make a positive difference to the way New Zealand financial services are considered globally and locally.
It's important for all of us that our markets are recognised abroad as a place worth doing business; and by New Zealanders as a place they are confident can help them to get ahead financially and in which they will be fairly and honestly treated.