CoFI Licensing Begins

From today the Financial Markets Authority (FMA) – Te Mana Tātai Hokohoko – will begin accepting licensing applications for financial institution licences under the Conduct of Financial Institutions (CoFI) regime.

Under CoFI, about 100 registered banks, licensed insurers, and licensed non-bank deposit takers such as credit unions will need to be licensed by the FMA to provide financial services to consumers.

CoFI, which comes into force on 31 March 2025, requires these institutions to put fair treatment at the heart of their business.

Each institution must treat consumers fairly – the “fair conduct principle” – through the requirement to establish, maintain and implement a fair conduct programme. They must take all reasonable steps to comply with the programme and with regulations that ban target-based sales incentives and regulate other types of incentives.

FMA Executive Director of Regulatory Delivery Clare Bolingford says: “It is important that consumers get the financial products and services they need throughout their life, when they need them, and have trust and confidence they will do what they are meant to. The overarching requirement for institutions to ‘treat consumers fairly’ is paramount throughout the lifecycle of a financial product.

“It applies when institutions are designing products and at the point of sale, where financial institutions should think about whether the product is right for the consumer rather than selling to just anyone. And it remains front of mind post-sale and throughout the customer relationship, particularly when consumers need clear information or when dealing with a claim or complaint.

“It’s important for firms to allow sufficient time to prepare their license application and consider the contents of their fair conduct programme well ahead of 2025 - we encourage firms to start that work now and submit their licence application as early as possible. We're here to help with the process and answer any questions.”

Institutions need to establish their fair conduct programmes before they submit their licence applications, but they don’t need to be fully implemented until the regime comes into effect.

The FMA has published various resources to help firms through the financial institution licensing process:

• Financial Institution licensing
• 8 steps to apply for a financial institution licence
• Standard conditions for financial institution licence
• Licensing FAQ
• Fair Conduct Programme (FCP)
• Quick link to the FMA online services for licensing
• CoFI intermediated distribution guidance
• Sales incentives and other regulations

About the CoFI regime

The FMA and Reserve Bank of New Zealand undertook joint reviews into the conduct and culture of banks and life insurers in New Zealand, in 2018 and 2019, respectively. More recently, the FMA also reviewed the conduct and culture of fire and general insurers. Those reviews found banks and insurers were not putting in place systems and processes to ensure consumers were treated fairly.

The reviews led to the introduction of the Financial Markets (Conduct of Institutions) Amendment Act 2022 (the CoFI Act). The CoFI Act amends the Financial Markets Conduct Act 2013 to ensure financial institutions treat consumers fairly. The CoFI regime, which commences on 31 March 2025, is designed to protect consumers by putting the consumer at the forefront of institutions’ decisions and actions.

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