The much-anticipated Financial Markets (Conduct of Institutions) Amendment Bill – aka COFI – continued its journey into law last week in a second reading interrupted by the valedictory speech of departing National MP, Nick Smith.
But in the space of a little over 11 minutes Labour MP Poto Williams and National’s Nicola Willis set the stage for what promises to be a torrid debate ahead.
In her spiel lasting almost nine-and-a-half minutes, Williams outlined the shape of the post select committee COFI, which will impose a new conduct-licensing regime on most financial institutions while vesting product-banning powers in the government.
“The conduct programme will require financial institutions to have policies, processes, systems, and controls in place that are designed to ensure they’re considering consumers’ interests and treating them fairly in all respects of their business and in their interactions with consumers,” Williams said. “…The second way the bill deals with incentives is via the creation of a regulation-making power which allows for the prohibition or regulation of particular incentives and practices. Cabinet has already agreed to prohibit incentives based on value or volume targets.”
However, the Labour MP noted the select committee had recommended several significant changes to the draft legislation that would clarify government powers and limit the impact on financial intermediary businesses not explicitly captured under the proposed fair conduct rules.
As reported in April, the Ministry of Business, Innovation and Employment (MBIE) has issued two COFI consultation papers covering broader draft regulations and specific proposals on how to treat intermediaries under the legislation.
James Hartley, MBIE general manager commerce, consumers and communications, said at the time: “We are consulting on regulations covering matters such as requirements for claims handling and complaints processes, and prohibitions of certain types of sales incentives.
“This will include, for example, banning sales targets for frontline staff at banks. We are also looking into the treatment of intermediaries– for example, brokers selling insurance on behalf of an insurer. The outcome of the consultation will inform the development of the Financial Markets (Conduct of Institutions) Amendment Bill.”
Submissions are due on both consultations by 5pm this Friday (June 18).
Meanwhile, the Smith-interrupted COFI debate can’t kick off again until at least next Tuesday (June 22) when parliament switches back on for business.
But in her less-than-two-minutes of airtime last Thursday, Willis suggested COFI won’t get an easy ride through the final readings.
“Yes, financial institutions, banks, insurers, and the like should have controls in place to ensure they are focused on the best interests of their customers, but this bill risks imposing a compliance-heavy, box-ticking exercise,” she said.
Labour, of course, has the numbers to pass the legislation with ease with COFI expected to be in place within weeks. However, the select committee also recommended extending the proposed transition period for the proposed law from the original two years to three years from the time COFI receives royal assent.