“Banana Republic at work.” That was the verdict of Dr Martien Lubberink, a regulatory specialist at Victoria University of Wellington, when Craig Stobo resigned as chair of the Financial Markets Authority in May. It might have seemed overly theatrical at the time. A few months on it looks closer to the mark.
A banana republic isn’t just a corrupt country. It’s a country where all the right institutions exist, on paper, and none of them get in the way of the people running things just how they want to. In recent weeks the Financial Markets Authority has lost both its chair and its chief executive under a cloud. And neither the agency nor the Government will provide the public with the key details.
First, Stobo went after an inquiry found that his political commentary fell well below the neutrality expected of a Crown entity chair. Then three days ago the Chief Executive Samantha Barrass departed with immediate effect, following on from her previous suspension from the job amid allegations about workplace conduct. Current and former staff have alleged bullying and retaliation, and a culture of fear that deterred people from complaining. Multiple investigations have been undertaken. But reports have been withheld from the public, and nobody will explain what Barrass’ departure cost. And a new chair has arrived with his own set of corporate conflicts of interest to manage.
This is becoming another case study in my thesis of “Broken New Zealand”, in which core parts of the economy, infrastructure, politics and public administration simply don’t work very well, with a casual regard for the need for integrity and transparency. In this case, it’s one more watchdog institution that might look good on paper, but when something serious goes wrong, all that machinery struggles to produce a straight answer or establish who was responsible.
The National Business Review newspaper describes the regulatory agency as “in tatters”. This is a real problem for the economy when the main policing agency of New Zealand’s financial markets is in no state to do its job.
Why the FMA exists
Most New Zealanders won’t have much interest in, or give much thought to, the Financial Markets Authority (FMA) Te Mana Tātai Hokohoko. All the headlines of recent months and years about dysfunction, allegations, investigations and high profile departures might simply look like more of the usual “Wellington soap operas”.
Yet the FMA’s failures connect directly to a financial system that underperforms, and that New Zealanders depend on for their savings whether they follow it or not. The FMA is the watchdog that is supposed to ensure that the financial markets don’t descend into crony capitalism and chumocracy. On the current evidence it is not doing that job.
A well functioning FMA is supposed to require disclosure and properly managed conflicts of interest from banks, insurers, KiwiSaver providers and listed companies. Yet at the moment the FMA seems unable to achieve those things for itself, let alone for the rest of the financial sector. And this matters, because as Finance Minister Nicola Willis said when she appointed the FMA’s new chair last month, “Every New Zealander with a KiwiSaver account has a stake in our capital markets.” Having confidence in that market is crucial, if people are going to rely on it for investment and retirement savings.
The agency was built out of a disaster. Between 2006 and 2012 New Zealand’s finance company sector collapsed. A parliamentary inquiry put the losses at more than $3 billion, affecting between 150,000 and 200,000 depositors who had been assured their money was safe. Those investors, in a phrase of Tony Molloy QC’s that Gareth Vaughan has revived at interest.co.nz, had been treated as “prey”. The Securities Commission, which was supposed to have been watching, was wound up.
Simon Power launched the FMA in 2011 saying the new body was “designed to restore the confidence of mum and dad investors in the financial markets by actively and consistently enforcing financial laws”.
Fifteen years on, its reach extends to almost everyone with a bank account. It regulates KiwiSaver, which holds around $140 billion of New Zealanders’ retirement savings and generated more than a billion dollars in fees last year. It supervises the conduct of banks and insurers and licenses financial advisers. Since 1 July it has also policed consumer credit, a job handed over by the Commerce Commission, which makes it this country’s single financial conduct regulator.
Unfortunately the evidence suggests that the regulator is failing, and the NBR has been tracking the FMA’s own survey results for years. The Ease of Doing Business Survey published just under two years ago found only 53% of stakeholders agreed it was easy doing business with the regulator, down 14 percentage points from 2023. Last year’s annual report showed only 63% of consumers were confident in the quality of regulation of New Zealand’s financial markets (against a target of 75%).
The standard the FMA sets for everyone else
The FMA requires the firms it regulates to disclose material information promptly and to manage their conflicts of interest properly. When something goes wrong, it expects a proper explanation rather than a statement issued in the hope that interest will fade.
In 2018 and 2019 the FMA and the Reserve Bank jointly reviewed the conduct and culture of New Zealand’s banks and life insurers. They told those firms, publicly, that how an organisation treats its own staff is a regulatory matter, because a poor internal culture eventually produces poor outcomes for customers.
The BusinessDesk columnist Dileepa Fonseka put the obvious test back in December before the latest crises. “You have to wonder,” he wrote, “what the financial markets regulator would make of a publicly-listed company getting its chair to temporarily step aside pending an investigation, announcing it late on a Friday, and then offering no clarity on what the investigation is about.” He then answered himself: “Oh, wait, that is effectively what has happened at the regulator itself.” His verdict was that the FMA was looking “increasingly like a ship in thick fog, mired in confusion, struggling to explain itself while demanding clarity from others”.
The problem is called “reflexive integrity”. A regulator’s authority depends on whether it will do the things it makes everyone else do. Barrass herself put this well to the Aldred inquiry, explaining why Stobo’s outside directorship mattered: “We need to be beyond reproach because the inappropriate management of conflicts is not just a matter of regulatory requirements, we take enforcement action when conflicts are not managed appropriately.” That report was released in May. Four months later the same organisation won’t say what it paid her to leave.
The scale of the internal problem has emerged only gradually. The MBIE investigation now under way is looking at the use of non-disclosure agreements, and at whether the FMA board and management exercised adequate oversight. More than 60 people have come forward to it. In the year to June 2025 the FMA recorded nine personal grievances, six of which produced payments totalling $181,950. The Reserve Bank, with nearly twice the staff, had two. The Commerce Commission had none.
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