The New Zealand Financial Markets Authority has published a supervisory review finding that licensed financial advice providers and discretionary investment management service providers generally met their obligations for handling retail client money and property. However, weaknesses in outsourced custody oversight, governance, investor reporting and fee information could expose clients to errors, fraud or other harm. The findings reflect current regulatory settings and will also inform the authority’s broader examination of custody law and market practices. The review drew on information from approximately 130 financial advice providers and in-depth monitoring of 20 licensed providers. Some firms mistakenly viewed outsourcing as transferring legal responsibility, conducted insufficient due diligence on custodians or lacked robust checks that independent custody reports reached investors. Other weaknesses included limited segregation of duties, informal incident and fraud controls, inadequate assurance and reconciliation oversight, and unclear explanations of custody fees and responsibilities. All licensed providers are encouraged to assess their client asset arrangements and maintain systems, controls and oversight proportionate to their business. The authority has given individual feedback to reviewed firms and may use regulatory tools if identified weaknesses are not addressed.
2026-09-01New Zealand Financial Markets Authority
New Zealand Financial Markets Authority finds gaps in oversight and reporting for client assets
The New Zealand Financial Markets Authority found that licensed providers generally met client asset obligations but identified gaps in outsourced custody oversight, governance, reporting and fee transparency. Providers remain responsible when services are outsourced and should ensure investors receive independent custody reports and clear information. The findings are also relevant to the authority’s broader review of custody regulation and market practices.