Insights from the FMA's review of fair conduct programmes received from financial institutions ahead of the commencement of the CoFI regime.
Download the Fair conduct programme insights report PDF
Foreword from Michael Hewes, FMA Director Deposit Taking, Insurance and Advice
The Financial Markets Authority - Te Mana Tātai Hokohoko (FMA) was established with the overarching statutory objective of promoting fair, efficient, and transparent financial markets. The Financial Markets (Conduct of Institutions) Amendment Act 2022 (CoFI) expands the FMA's mandate as a conduct regulator and strengthens consumer protection by requiring financial institutions to prioritise the fair treatment of consumers.
CoFI requires financial institutions to be licensed by the FMA, and to establish, implement, maintain and comply with an effective fair conduct programme (FCP). An FCP means policies, processes, systems and controls that are designed to ensure the financial institution's compliance with the fair conduct principle, which is that financial institutions must treat consumers fairly.
While some financial institutions hold other market service licences issued by the FMA and therefore have experience engaging with the FMA, we acknowledge this will be new to others. We are committed to open, collaborative relationships to support fair consumer treatment. Over the past two years we have supported financial institutions in obtaining their licences and preparing for the new regime. We have published guidance, met with financial institutions individually, and engaged with the wider sector in-person and through online webinars and roundtables.
Financial institutions are a diverse population with different business structures, consumers, products and services. CoFI is designed as a principles-based regime, which gives financial institutions the flexibility to design an FCP that fits their business model. For this report, we have reviewed FCPs from a range of entities that vary in size, product offering and consumer profile. We believe that all financial institutions can learn from these insights. Our aim by sharing insights early in the regime is to assist financial institutions to continuously improve their FCPs and their approach to fair consumer treatment.
Encouragingly, we saw that many financial institutions have taken a comprehensive approach to the development of their FCPs, ensuring they align with their business nature, size, complexity and risk profile. Some have gone beyond the minimum requirements to build comprehensive, consumer-focused practices. This report spotlights some of these examples of good practice, as well as evolving areas of risk we think all financial institutions should consider as the financial services landscape evolves.
In these first years of the regime, we will continue to take an educative and collaborative regulatory approach, supporting financial institutions as they refine and strengthen their approach to fair consumer treatment. We also intend to undertake a more in-depth review of FCPs and share findings supported by evidence of how the programmes have functioned in action. We encourage financial institutions to build on the good work they have been doing, think beyond simply meeting the minimum requirements, and foster a culture that actively identifies, monitors and manages current and evolving risks associated with fair conduct.
