Pressure Builds to End Sales Incentives

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An end to sales incentives based on volume or value targets is one idea being floated by MBIE in a discussion paper related to the Financial Markets (Conduct of Institutions) Amendment Bill.

Emmeline Rushbrook and Bridgette White of law firm Russell McVeagh say the paper includes a regulation-making power which allows for the prohibition or regulation of “…any practice, activity, or other conduct in connection with offering or giving incentives”.

They say: “This is an aspect of the paper that all financial institutions and intermediaries should consider carefully against their business models. The discussion document’s current preferred option is for regulations that prohibit sales incentives based on volume or value targets.”

The paper says:

  • This option would prohibit banks, insurers, and non-bank deposit takers, and their intermediaries, from offering incentives which are linked to sales volume or value targets
  • The option would cover any incentive (whether monetary or non-monetary and whether direct or indirect) that is determined or calculated in any way by reference to the volume or value of relevant services or associated products, and which has any target component to it (broadly defined)

Rushbrook and White say MBIE reiterates that the intention of the the so-called CoFi bill amendment is not to ban all sales incentives. An alternative option is that a more principles-based approach be adopted, rather than a blanket ban of targets.

Download MBIE’s discussion document here.