New regulatory priorities land as FMA takes on consumer credit oversight from 1 July
New Zealand's financial markets regulator has signalled a sharper focus on mortgage fraud, conflicted remuneration, and fraud prevention across the lending sector.
The Financial Markets Authority (FMA) has released its second annual Financial Conduct Report, setting out regulatory priorities for the 2026/27 year alongside a review of the past 12 months of regulatory activity.
Commission conflicts and fraud prevention take centre stage
For mortgage advisers, two priorities stand out. The FMA has active investigations into alleged mortgage fraud and will continue using its full range of enforcement tools — having already removed several financial advisers from the market for insurance fraud.
In 2025/26, the regulator wrote to FAP aggregators, professional adviser associations, and lenders to outline concerns and share a list of fraud red flags; that work continues into 2026/27 with a focus on strengthening detection and prevention processes.
On remuneration, the FMA's Financial Advice priorities for 2026/27 put financial advice providers on notice over commission-based conflicts.
Monitoring in 2025/26 found inconsistent disclosure of actual commissions payable to both FAPs and individual advisers and identified commission structures that in some cases prioritise new business over servicing existing clients. The FMA's report notes it continues "to receive reports of misconduct motivated by high upfront commissions."
KiwiSaver fraud and the consumer credit transfer
The FMA has flagged fraudulent use of KiwiSaver first-home withdrawals as a specific priority, with active investigations already under way into cases where funds may have been misused or fraudulently applied to the detriment of first-home buyers. Fund managers will face scrutiny over their verification and approval processes for first-home withdrawal applications.
The report's release coincides with a landmark structural shift: consumer credit regulation transfers from the Commerce Commission to the FMA on 1 July, bringing home loans, personal lending, and the broader consumer credit sector under a single conduct regulator for the first time. Mortgage advisers and brokers hold an indirect regulatory relationship under the transfer.
FMA chief executive Samantha Barrass (pictured) described it as a meaningful expansion of the regulator's reach.
"The addition of consumer credit to our mandate is an important step that will strengthen consumer protection and enable more consistent oversight across the financial system," Barrass said, adding that the move was "particularly important as we're currently operating in a global environment of significant uncertainty and heightened risk, reinforcing the importance of a robust, well-functioning financial system that supports New Zealanders and remains resilient."
AI and innovation: a signal for advisers to act
Beyond fraud prevention, the FMA is also looking at how technology can reshape the advice sector itself. The regulator is actively exploring how AI can improve access to financial advice, including a planned thematic review of AI use in advice.
Notably, the FMA found that many firms are currently taking an unnecessarily cautious approach to innovation — and that there is a clear opportunity to build greater confidence across the sector in how responsible adoption of AI can support good consumer outcomes.
The FMA's report states: "We recognise the importance of embracing innovation, including the growing role of AI in the financial system. New technologies present real opportunities to improve access and deliver better outcomes."
The full Financial Conduct Report 2026/27 is available at fma.govt.nz.
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