The Reserve Bank of New Zealand – Te Pūtea Matua (RBNZ) published its Enforcement Guidelines and Investigation Guidelines, completing its enhanced Enforcement Framework, on 26 January 2023.
Building on from the foundation document ‘Enforcement Principles and Criteria’ which was published in May 2022, these two new documents complete the framework which Deputy Governor and General Manager of Financial Stability Christian Hawksby believes will set out ‘policy for how we select matters for investigation, conduct investigations, and ultimately take decisions relating to enforcement matters’.
See the Enforcement Framework and an outline of what each document contributes to the framework.
Who needs to read it? Why?
Entities regulated by RBNZ should read the Enforcement Framework to inform their approach to investigations by the RBNZ, how the RBNZ considers potential breaches and planning for any remediation process.
What does the Enforcement Framework cover?
The Enforcement Framework is made up of three documents which guide RBNZ on how it is to act when using its enforcement discretion. It also provides public guidance on the enforcement process.
The ‘Principles and Criteria’ document outlines the important considerations that the RBNZ works through when deciding on the appropriate enforcement response. This document was published in May 2022 – see our update.
The new ‘Enforcement Guidelines’ document provides a regulatory response model for enforcement and further outlines how RBNZ applies the Enforcement Principles and Criteria. The guidelines set out the regulatory response model which includes:
- Heightened supervision where non-compliance is repetitive or more serious. This may involve increased engagement with the regulated entity and its board, or increased reporting obligations. or remediation. This is likely to be supervision-led;
- Targeted response for prevalent or severe non-compliance which may require formal action. This may include statutory warnings and enforceable undertakings which are likely to be enforcement-led. Also included are public or private warnings, changes of licencing conditions, removal of directors or a direction to a regulated entity, which are generally supervision-led; and
- Court response for serious breaches. This may include criminal prosecutions and civil action.
The ‘Investigation Guidelines’ document describes the RBNZ’s approach to investigations and how to apply the Enforcement Principles and Criteria throughout the lifecycle of an investigation. The Investigation Guidelines also describe the use of information gathering powers under the legislation.
Our view
The publication of these new enforcement documents signals the maturation of the relatively new enforcement arm of the RBNZ. There is some helpful detail on the combination of tools which the RBNZ will use in response to breaches of differing levels of severity. The framework can assist in planning your response when dealing with an investigation or enforcement action but as is always the case, the response will be fact dependant based on severity, harm, degree of cooperation and responsiveness of the entity and the need for deterrence.
We can expect to see the RBNZ issuing formal notices for information requests more regularly than voluntary requests as the RBNZ has expressly recognised that recipients of requests for information often feel more protected by a formal request or have obligations of confidence which mean they cannot disclose information without being compelled to do so. It is also important to note that information provided to the supervision arm of the RBNZ can be used by the enforcement team in an investigation and any later enforcement action so a linked up approach to dealings with the RBNZ is required.
If you have any questions about the RBNZ's new Enforcement Framework, please contact one of our experts below.
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