The Financial Markets Authority (FMA) and the Commerce Commission have signed a Memorandum of Understanding on how they will manage the interface between their respective jurisdictions.
While the MOU is useful, the lack of clarity around the roles of the two regulators remains.
The boundary issue
The Financial Markets Conduct Act 2013, for which the FMA is the regulator, contains a suite of provisions governing misleading and deceptive practices in connection with financial products and financial services.
The Fair Trading Act 1986 (FTA), which is regulated by the Commerce Commission, governs misleading and deceptive conduct (sections 9 to 13) in relation to goods and services. But the definition it uses for what constitutes a good or service is broad, creating a risk of overlap between the two regimes.
The FTA now requires that the Commerce Commission must obtain the consent of the FMA before commencing civil or criminal proceedings for contraventions of sections 9 to 13 involving financial products or financial services. The FMA is required to take account of a number of factors in making its decision but has a relatively wide discretion.
However, the proceeding will not be invalidated if consent is denied.
So what does the MOU say?
At a high level, the MOU records that:
- the FMA is the primary regulator for misleading and deceptive conduct in relation to financial products and financial services, and
- the Commerce Commission is the primary regulator for misleading and deceptive conduct in relation to consumer credit conduct.
Curiously the MOU states that the Commission “may seek consent from FMA permitting it to bring proceedings under the FTA in relation to financial products and financial services”. But on our reading of the FTA, the requirement is mandatory not permissive. It is only if consent is not obtained, that the Commission may still commence proceedings.
Beyond that, the interaction between the two regimes remains an uneasy one and not easily navigable. If a supplier is facing an investigation under either piece of legislation, it would be wise to assume that the regulators will collaborate. Any strategic response needs to take into account exposures on both fronts.
So what do we know about the enforcement priorities?
At this stage, not a great deal. As independent Crown entities, both are required to produce statements of intent, which will include disclosure of output classes with money from Vote Commerce allocated to each class. In the case of the Commerce Commission this can provide a valuable indication of where the Commission is placing its enforcement focus. These statements are due out around May.