The Government introduced the Financial Markets (Conduct of Institutions) Amendment Bill yesterday.
The Bill aims to improve the conduct of banks, insurers and other financial service providers in respect of their services and products, to ensure the fair treatment of their customers.
It was announced by the Government in September (see: Government Announces Conduct Licensing Regime for Insurers and Banks…).
“This regime has been designed in response to recent reviews that have identified that certain institutions, particularly banks and life insurers, lack focus on good outcomes for customers and have ineffective systems and controls to identify, manage, and remedy conduct issues,” the explanatory note stated.
It noted that the Bill “requires financial institutions that are in the business of providing relevant services to obtain a licence under Part 6 of the FMC Act. The scope of the regime is intended at this stage to cover registered banks, licensed insurers, and licensed non-bank deposit takers and to apply broadly to all services and associated products provided by those institutions.”
The bulk of the Bill will come into force no later than two years after the date of Royal assent.
“The Bill contains a regulation-making power to prohibit or regulate certain activities related to the offering or giving of sales incentives in connection with a relevant service or associated product,” the explanatory note stated.
“These regulations may apply to existing incentive arrangements and those entered into before the commencement of the regulations, but cannot apply to any incentive that is paid, is payable, or to which a person has become entitled before the commencement of the regulations.”
Responding to the announcement, Financial Advice NZ has welcomed the bill to improve financial services, products and conduct.
Chief Executive, Katrina Shanks, says the Bill should be welcomed by the whole sector.
“Financial Advice NZ’s members are right behind anything that prioritises customers’ interests to ensure they can access quality advice and products,” she said.
“The move to bring institutions under a fair conduct regime that ensures consumers are treated fairly, starting from the early design of products and services right through to the claims process is very timely because the end user must always be at the centre of product design and suitability.
“And while there’s a duty on product providers to ensure their products will likely lead to good customer outcomes, financial advisers will also play their part when they’re delivering those products.”
She added: “We were pleased to see the carving-out of Financial Advice Providers from this legislation to allow the implementation of the Financial Services Legislation Amendment Act, which also has a strong emphasis on treating clients fairly.”
Shanks noted, however, that further clarification is also needed.
“For example, the intent of the bill is to exclude the advice process; the drafting of the bill excludes the Financial Advice Provider entity, while it is unclear whether the adviser is excluded under this classification.”
“…the drafting of the bill excludes the Financial Advice Provider entity, while it is unclear whether the adviser is excluded under this classification.”
She said they would also like to see the definition of fair conduct included in the bill so it can be easily identified by consumers.
“We also note the bill contains a power to prohibit or regulate the offering or giving of sales incentives for some products. In principle, this is a good idea because we recognise that from time to time this has sent incorrect messaging to those providing advice.
“However, we will be submitting to the select committee on the processes and controls that need to be in place to ensure New Zealanders can continue to access financial advice,” she said.
Click here to view the Bill.