FMA Progressing CoFI Implementation With Publication Of Licensing Materials

The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko is continuing to progress preparations for the Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI), with the release of a suite of materials for banks, insurers and non-bank deposit takers (NBDTs).

Today, the FMA published:

• an information sheet on Fair Conduct Programmes (FCP)
• a guide to Financial Institution licence requirements
• final standard conditions for Financial Institution licences (including a summary of key feedback themes arising from the consultation and a Regulatory Impact Statement (RIS))

Fair conduct programmes ensure firms give effect to the fair conduct principle within the legislation that says firms must treat consumers fairly. The requirement to treat consumers fairly includes, but is not exclusive to, these factors:

· paying due regard to consumers’ interests

· acting ethically, transparently, and in good faith

· assisting consumers to make informed decisions

· ensuring the products and services the financial institution provides are likely to meet the requirements and objectives of likely consumers (when viewed as a group)

· not subjecting consumers to unfair pressure or tactics, or undue influence.

The information sheet for FCPs is a useful resource to help entities complete this work as a necessary part of fulfilling the licensing requirements. The document has high level suggestions as to how an institution might go about establishing, implementing and maintaining an FCP. Boards are expected to approve and take accountability for an institution’s FCP.

The licensing guide is designed to provide clarity on how to complete the licence application process which opens on 25 July 2023. The FMA will engage and support the sector to prepare for and apply for licensing, leading up to and after this date.

The standard conditions for a Financial Institution licence were also confirmed, following a consultation from July to September. The six proposed standard conditions have been maintained, with some minor amendments following feedback.

Clare Bolingford, FMA Director of Banking & Insurance, said: “The FMA has always taken a facilitative and supportive approach to implementing new legislation and obligations, to help industry understand new requirements. This suite of documents will assist institutions in preparing for the new regime by providing additional clarity and guidance, ahead of licensing opening next year.”

About the CoFI regime

The CoFI Act will introduce a new regulatory regime for the conduct of registered banks, licensed insurers and licensed non-bank deposit takers, with an overarching principle for these financial institutions to treat consumers fairly.

Once the new regime comes into force (expected in early 2025), registered banks, licensed insurers and licensed non-bank deposit takers providing services to consumers will need to operate under a ‘financial institution licence’ issued by the FMA. All licence holders and each of their authorised bodies will need to comply with the standard conditions.

The FMA will begin accepting licence applications from 25 July 2023, about 18 months prior to the new legislation coming into force.

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